Eurostocks ease on Pru profit squeeze, tech wobble

Falling insurance shares after weaker-than-expected results from Britain's Prudential, a clutch of cash calls to investors and troubling German data sent European shares lower yesterday afternoon.

The technology sector, Europe's best performer in 2003 and so far this year, was hit by concerns that shares in Europe and the US have become too pricey.

By 1436 GMT, the FTSE Eurotop 300 index of pan-European blue chips was off 1.1 per cent at 1,001 points, hovering around the 1,000 point mark it pushed above on February 12 for the first time since August 2002.

Decliners outpaced advancers by more than six to one. The DJ Euro Stoxx 50 index shed 1.5 per cent to 2,862 points. Standard & Poor's said some sectors in Europe were ripe for investors to cash in on their shares, such as technology trading at 25 times 2004 earnings and media at 20.5 times, well above the 16 times earnings level seen as reasonable for the European market.

"Importantly, our view is short term in nature and is not a call on the fundamentals of these sectors," said Clive McDonnell, a European strategist at S&P Equity Research.

On Wall Street, the Dow Jones industrial average was off 0.2 per cent at 10,589 points, while the tech-laden Nasdaq Composite shed 0.5 per cent to 1,996 points, extending Monday's 1.5 per cent slide.

News of a sharper-than-expected 30 per cent drop in annual profit at Britain's second-largest insurer Prudential, sent the group's stock down 5.7 per cent to 480.5 pence and chilled the sector.

Prudential also slashed its dividend for the first time since World War One.

Insurers topped Europe's blue-chip decliners' column, with German's Allianz, France's AXA, Dutch Aegon, and Swiss Re all down between 2.5 per cent and 3.3 per cent.

Prudential's domestic rival Aviva, which reports today, fell 2.6 per cent.

The sector is also sensitive to any general pullback in equities, which dents the value of insurers' holdings in shares.

Investors also faced a possible trio of cash calls. Swiss speciality chemicals firm Clariant AG asked for 920 million Swiss francs to repair finances yesterday even after returning to profit last year for the first time since 2000, knocking its shares down eight per cent.

French peer Rhodia aims to raise €450 million in April, instead of €300 million as indicated, the French daily La Tribune reported, though the company was unavailable for comment as the stock eased 1.4 per cent to €3.46.

German bank HVB Group fell on reports it would raise up to three billion euros to digest write-downs and strengthen its balance sheet.