Eurostocks led lower by techs, insurers; NY tumbles

European shares were broadly lower yesterday afternoon, with technology stocks hobbled by a sales warning from France's Alcatel and as Wall Street got off to a weaker start.

Insurers such as Royal & Sun Zurich Financial were also under the cosh as the sector gave back most of Monday's hefty gains amid continuing concerns about their exposure to falling stock markets.

Munich Re slipped 6.7 per cent after a broker downgrade. The threat of war in Iraq was at the forefront of investor concerns ahead of a key speech by US Secretary of State Colin Powell to the United Nations Security Council today.

"Iraq is clearly top of the list of market worries at the moment and an obvious point of focus is Powell's presentation to the Security Council tomorrow," said BNP Paribas European equity strategist David Thwaites.

Powell has said he will provide "sober and compelling proof" that Iraq is hiding weapons from UN arms inspectors - a move that is seen ratcheting up the prospects of war.

"They will probably end up giving the weapons inspectors more time, presumably something in the order of four to six weeks. But until we have something clearer on a timetable and whose going to be going in with the Americans, it's just more uncertainty for the markets," Thwaites said.

By 1440 GMT, the FTSE Eurotop 300 index was down 2.5 per cent at 791 points as decliners outpaced advancers by about 10 to one. The narrower DJ Euro Stoxx 50 index fell 2.8 per cent to 2,206 points.

On Wall Street, the Dow Jones industrial average opened 1.2 per cent lower, while the tech-laced Nasdaq Composite ditched 1.2 per cent amid growing war jitters.

Alcatel was Europe's biggest blue-chip decliner, falling 6.9 per cent after it forecast a sharp decline in first-quarter sales.

"What we've seen from Alcatel and a few others and from America last week is that corporate Europe and corporate US hasn't definitively turned the corner yet. There is just not enough confidence and no guidance," said Thwaites.

Rival Ericsson sank 11 per cent, extending Monday's near 12 per cent plunge when the Swedish group said its first quarter sales would slide by a third.

Morgan Stanley cut its rating on Ericsson to "underweight" from "equal weight" and cut its price target to 2.5 crowns from 3.5 crowns, citing problems in the industry overall.

"We still see risks of further negative news flow for the industry. We are not confident we have reached the end of operator cuts to capex," the bank said in a research note.

Banks were also under pressure, with Commerzbank shedding 4.4 per cent after Reuters reported late on Monday the bank would post a big 2002 loss. Rival HVB fell 6.9 per cent.

Elsewhere, shares in Allied Domecq, the world's second largest spirits group, fell 7.6 per cent after it said full-year earnings would only be in line with last year.

Among the handful of gainers, industrial gas and engineering group Linde rose 4.4 per cent after UBS upgraded the stock to "buy" from "neutral".