Eurostocks at four year lows, Eurotop sheds 4.95 per cent

October 1998's lows loomed large for European shares as losses accelerated in late trade yesterday, ahead of a busy week of earnings, with no obvious catalyst aside from Aegon's profit warning, which hit battered insurers.

"Investors are getting murdered by the volatility, and I can't see trading conditions returning to normal until after the holiday season has ended," said Robert Kerr, pan-European strategist at Bank of America.

With WorldCom on Sunday succumbing to the inevitable and filing the largest-ever US bankruptcy, and with a welter of key earnings due later in the week, the underlying mood among investors remained decidedly edgy.

By 1534 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was down 4.95 per cent at 889 points, within spitting distance of the 880.63 points trough of October 1998.

Declining issues outpaced advancers by more than 10-to-one. The Euro Stoxx 50 index of euro zone blue chips was down 5.7 per cent at 2,541 points.

In New York the Dow Jones industrial average shed 2.5 per cent while the tech-laden Nasdaq Composite lost 2.9 per cent.

Among the top US firms due to post second-quarter earnings after European markets close is chip maker Texas Instruments, which reaffirmed its second quarter outlook in June.

That will set the scene for Europe's biggest chip maker STMicroelectronics, which publishes its results this evening.

Among the other major European names reporting earnings today is the world's top news and information agency Reuters and French software maker Dassault Systemes.

Strategists saw some potential for nervy markets to stabilise after August 14 - the deadline by which the chief executives and chief financial officers of top US-listed firms must certify on oath that their company's latest results are accurate, thereby making themselves personally liable if later proved otherwise.

That increased the scope for company restatements and volatility in the short-term but also gave strategists hope that a line could be drawn under the whole issue of suspect accounting, allowing markets to focus on the ongoing economic recovery and gradual pickup in earnings.

The DJ Stoxx insurance index easily topped the sectoral loserboard, shedding 8.4 per cent after Aegon cut its 2002 profit forecast by a third due to increased provisioning for rising corporate defaults and a weak dollar.

Aegon also said it would have to beef up reserves eroded by a slide in stock markets, highlighting the vicious circle that trapping Europe's insurers, broadly down about 42 per cent so far this year.

French insurance group AXA and Zurich Financial were caught in the Aegon crossfire, falling 10.9 per cent and 16.6 per cent respectively.

Shares in Aegon slumped 17.8 per cent. Shares in Swiss bank-insurer Credit Suisse Group eased 10.3 per cent, while those in Britain's biggest insurer by market cap, Prudential, fell eight per cent, ahead of its first-half earnings tomorrow.

An analyst at a European investment bank said there was still repeated talk of insurers having to dump shares to raise cash to meet solvency rules.

Elsewhere, Anglo-Dutch oil group Royal Dutch lost 9.8 per cent after it was shunted from the S&P 500 index a previously announced move.

Among other standouts, shares in German fashion group Hugo Boss slumped 18.4 per cent after the group issued its second profit warning in as many months due to tough market conditions.

UK bus and train operator Stagecoach Group sank 27 per cent after confessing to more trouble at its USbus operations, cutting its dividend and dumping its chief executive.

In the healthcare sector, Denmark's Novo Nordisk was down 14 per cent after the world's leading diabetes care group said it was suspending development of a key insulin drug project, dealing a serious blow to the company's prospects.