Eurostocks dive after data

European blue chips were set for their biggest one-day loss in more than two weeks yesterday, as investors booked profits in high-flying telecom, technology, and insurance stocks after less-than-impressive US data.

France Telecom was among the biggest losers, amid talk of a rights issue. Also down sharply was ING, as the Dutch bancassurer placed nearly two per cent of its shares.

By 1653 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was down two per cent at 914 points, and the narrower DJ Euro Stoxx 50 index sank 2.66 per cent to 2,567 points.

Volumes were solid, and losers outpaced gainers by almost four-to-one, as investors looked to build up cash ahead of tomorrow's US Thanksgiving holiday.

But that still left the Eurotop more than 16 per cent better off than the five-and-a-half month low plumbed in early October, and those sectors that have performed best in recent weeks were among the day's biggest decliners.

The DJ Stoxx telecom, insurance, and tech indices fell by three-to-four per cent each, having risen on Monday to their highest level in three-to-six months.

Germany's Ifo business sentiment report set a gloomy tone early in the day, after the index fell for the sixth month in a row, signalling continued weakness in Europe's biggest economy.

November US consumer confidence data then helped extend the losses, after failing to recover by as much as economists had forecast.

But economists said the improvement still reinforced earlier data showing a pickup in flagging US consumer confidence and bode well for the future, even if equity investors had exploited the news to book some profits after seven weeks of gains.

"The pieces are falling into place for a pick up in US growth in the early months of next year," said economist Adam Cole of Credit Agricole Indosuez.

Strategists added that the market's rally to two-month highs had also run out of steam because the longer-term issue of future profits remained unresolved.

"Some of the uncertainty has been removed in so far as people now expect the US economy to muddle through, and although pessimism has increased over the European economy, investors are banking on an ECB rate cut next month," said Rupert Thompson, global equity strategist at E*TRADE Securities.

"But there are still longer-term concerns over how big a pickup in company profits we'll see next year, and that is fostering a reluctance among people to chase the rally higher at these inflated levels."

France Telecom slumped 9.7 per cent amid speculation that the indebted group may launch a rights issue and is mulling the sale of mobile phone subsidiary Orange, which lost 5.24 per cent. France Telecom declined to comment.

Other telecom stocks sank in its wake, including similarly indebted Deutsche Telekom, which lost 6.1 per cent, and Britain's mmO2, which sank 10.28 per cent.

Europe's biggest mobile operator Vodafone fell 4.07 per cent in the wake of reports, denied by the company, that it planned to bid for French media giant Vivendi Universal, and after a broker downgrade.

Vivendi rose 3.4 per cent on the reports. ING slid 7.21 per cent to e18.14 on its plans to sell 36 million of its own shares, or 1.8 per cent of its outstanding ordinary shares, to boost its solvency.

Financials were weighed down by a 6.91 per cent fall in Dutch-Belgian financial services group Fortis after ABN AMRO cut its estimates of the group's earnings for 2002 to 2004.

On the plus side, Italian gas distributor Italgas soared by 13.9 per cent after oil and gas group Eni said late on Monday it would pay e2.5 billion for the 56 per cent of the company it does not already own.

On Wall Street, the Dow Jones industrial average slid 1.4 per cent and the tech-laced Nasdaq Composite shed 1.1 per cent after the US Conference Board released consumer confidence data that was slightly below expectations.

The consumer confidence index rose to 84.1 in November from 79.6 in October. Economists had forecast a rise to 85.2.

The market earlier drew some comfort from data that showed the US economy expanded by a better-than-expected four per cent in the third quarter and that US corporate profits rose 2.1 per cent in the same period.

But the real test will come next week, traders said, with the release of several forward-looking business sentiment surveys on both sides of the Atlantic and the publication of key US labour market data.