Chemicals-led eurostocks end down as outlooks weigh

European equities ended a hectic week of earnings roughly where they started as strong figures from UK bank Alliance & Leicester and Dutch chemicals group DSM added to a picture of patchy recovery.

Heavily-weighted oil and pharmaceutical shares also fuelled market losses after oil major Royal Dutch/Shell was downgraded by Lehman Brothers, while drugmakers led by Sanofi-Synthelabo were hit after world sector leader Pfizer reported a net quarterly loss.

But encouraging numbers earlier this week from such marquee names as industrial giant Siemens, carmaker DaimlerChrysler and drugmaker Roche helped European markets close flat to slightly higher on the week.

By 1540 GMT, and with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was down 0.9 per cent at 861 points. The index headed for a 0.5 per cent rise on the week, standing about 27 per cent above mid-March's six-year lows.

The narrower DJ Euro Stoxx 50 index lost 1.7 per cent to 2,438 points as the CAC 40 in Paris closed 1.5 per cent lower and Frankfurt's DAX had shed 1.3 per cent by 1540 GMT.

In London, the FTSE 100 ended off 0.4 per cent. Although very few companies can boast an improvement in sales or profits compared to a year earlier, investors are drawing relative comfort from earnings that are on average in line with expectations and from signs of further corporate restructuring.

But some strategists said that a lack of top-line growth and still relatively cautious outlooks from many companies limited the market's upside potential, with European indices likely to remain stuck inside current narrow trading ranges in the near to medium-term.

"A gradual economic recovery is on its way and as we look into the second half of the year, we'll see top-line growth slowly coming back for companies," said SG Assets Management strategist Michaela Marcussen.

"Overall, the economic picture is still a mixed one but there are a number of encouraging things that are going on," she said, citing ongoing corporate restructuring, the stabilisation of the euro and structural economic reforms in Germany and France.

Across the Atlantic, the Dow Jones industrial average added 0.2 per cent, after a durable goods orders report showed surprising strength and bolstered investors' hopes the economy was entering a long-sought rebound.

The tech-laced Nasdaq Composite fell 0.2 per cent.

But in Europe, companies such as DSM reminded investors that the economic environment remained challenging for now, with the Dutch firm warning it was unlikely to match last year's operating income this year and that the third-quarter figure could fall steeply from the previous three months.

DSM shares fell 3.6 per cent, while those of Rhodia ended 4.6 per cent lower after the French company forecast a tough second half and posted a second-quarter net loss because of high input costs and a weak dollar.

Other decliners included French retailer Carrefour and Germanys Metro after Credit Suisse First Boston cut its recommendation on both stocks due partly to a relative lack of organic sales growth.

But there was bullish news from Alliance & Leicester, which reported a 12 per cent rise in first-half profits and pledged to step up share buybacks, boosting its shares 4.7 per cent higher and overcoming concerns about a cooling housing market.

Autos were also a bright spot after Germany's Volkswagen said its pre-tax quarterly profit had fallen by less than expected and French rival Renault posted a 32-per cent jump in half-year net profit and forecast another record year at the net level in 2003.