European shares fall as telecoms and techs weigh

European shares fell yesterday, led by technology and telecom stocks as a revenue warning by Lucent and worries over the outlook for the telecoms industry weighed on markets.

Europe's FTSEurofirst 300 index of top European shares ended 0.65 per cent weaker at 1,303.34 points, according to unofficial closing figures. The narrower DJ Euro Stoxx 50 fell 1.1 per cent to 3,629.71 points.

Germany's DAX dropped 1.1 per cent and France's CAC 0.8 per cent, while Britain's FTSE fell 0.4 per cent. Across the Atlantic, the US Dow Jones industrial average was flat at 10,974.44 by 1637 GMT.

Tech stocks slid, with giants such as Philips France Telecom or BT Group falling more than two per cent as Lucent's warning came on the heels of a cut in sales outlook from the France Telecom firm on Thursday.

Lucent lowered its forecasts yesterday, saying it expected revenues to be flat or up in low-single digits. That compares with its previous forecasts for a mid-single-digit revenue rise.

"Telecoms and tech stocks (also) still get hit by France Telecom's sales warning," said Markus Steinbeis, a senior fund manager at Activest in Munich.

Several banks cut their investment ratings on France Telecom after it cut its 2005 sales forecast and also predicted slower growth this year.

"Uncertainty has increased with little clarity on the drivers of the cuts," said UBS analysts, cutting the stock to "neutral" from "buy". Among other standout losers, shares in German insurer Allianz fell 2.4 per cent after Merrill Lynch and Sal.Oppenheim cut their ratings.

"Investors are taking profits in insurers because it (the sector) has been one of the top performers since October," Mr Steinbeis said.

Shares in Tamiflu maker Roche rose 1.2 per cent on hopes it might sell more pills to combat bird flu.

Oil majors including BP wobbled as crude oil futures fell to $63.25 a barrel despite concerns over the Iranian nuclear impasse. Iran has warned it will end voluntary cooperation over its nuclear programme if the United Nations tries to impose sanctions.

"Iran has been a problem for a long time as we all know and it is something that rears its ugly head from time to time. The Iran issue is not something new," said a trader.

German sugar producer Suedzucker, one of the few companies to report earnings yesterday, dropped 1.8 per cent after its third-quarter operating profit fell nearly 21 per cent.

Analysts expect European stock markets to go sideways or ease slightly with investors awaiting US company earnings such as Intel, Apple and Motorola and with no real agenda driver from Europe.

"There could be one or another companies disappointing," said Manfred Bucher, an equity strategist at BayernLB.

Activest's Steinbeis agreed: "I think we have entered a consolidation phase that could last one or two weeks."