Eurostocks trip on poor US data, Thomson cuts forecast

Volatile insurance shares led European stock indices to close off five-month highs yesterday after an unexpected deterioration in US consumer sentiment poured cold water on hopes the economy was on the mend.

And Thomson, the world's fourth-largest producer of consumer electronics, led technology shares lower after it cut its 2003 outlook and unveiled a snap restructuring that includes some 800 job cuts at a television parts factory in the United States.

But Inditex, the Spanish owner of fashion chain Zara, was a bright spot after posting a better-than-expected 23 per cent rise in first-quarter net profit. Its shares tacked on about 5.6 per cent .

By 1600 GMT, and with only Frankfurt still officially trading, the FTSE Eurotop 300 index was down 1.4 per cent at 855 points, erasing weekly gains of as much as two per cent to bring the benchmark back to where it closed last Friday.

The DJ Euro Stoxx 50 index was 1.5 per cent weaker at 2,443 points while in New York, the Dow Jones Industrial and the tech-laced Nasdaq Composite shed one per cent and 1.5 per cent respectively.

The University of Michigan released its preliminary consumer sentiment index for June, showing a slide to 87.2 from May's 92.1 and widely below expectations for 93.4.

Consumer confidence is often seen as a precursor to consumer spending, which drives two-thirds of the US economy. But economists sometimes play down its impact, citing discrepancies between what consumers feel like doing and what they actually do.

Even more worrying, the survey's gauge of consumers' outlook for the economy slumped to 84.2 from 91.4 in May, suggesting that Americans were having a hard time sustaining the optimism that followed the end of the war in Iraq.

"The (US) figures are awful," said Valerie Plagnol from CIC in Paris. "Consumers are destabilised and will remain so for as long as the job situation will continue to deteriorate."

Around Europe, Britain's FTSE 100 and France's CAC-40 indices closed 0.7 and 1.4 per cent lower respectively while Germany's DAX was 1.1 per cent lower by 1600 GMT.

Insurers, so called high-beta stocks that emphasise overall market moves, spearheaded blue-chip decliners as investors pocketed recent profits. Germany's Allianz was down 3.6 per cent while Dutch peer Aegon sagged 6.7 per cent .

Dutch retailer Ahold was another victim of profit-taking after a recent string of gaining sessions that nearly doubled its stock value, and amid investor nervousness as the group prepares to unveil the results of three final probes in a step to lay to rest a devastating accounting scandal.

On the upside, Britain's biggest food retailer Tesco rose 3.2 per cent after it reported strong first-quarter group sales growth of 15.1 per cent , winning customers from weaker rivals in the face of slower consumer demand at home.