European shares fall, led by Siemens

European shares fell to their lowest close since June 8, yesterday, led by a decline in industrial conglomerate Siemens while concerns about financing for takeovers and the US housing market grew.

Siemens shares fell 6.4 per cent after posting disappointing results and after selling its VDO Automotive unit for less than had been rumoured to Germany's Continental.

The pan-European FTSEurofirst 300 index unofficially closed 0.9 per cent lower at 1,571.04, its lowest close since June 8.

Data show the pace of existing home sales in the US fell in June to a lower-than-expected annual rate while prices and inventories showed signs of stabilising. European stocks had lost ground by midday yesterday, as fresh worries about the health of the US economy and mixed corporate results helped drag the market to a one-month low.

The auto sector was among the worst hit after Volvo, the world number-two truck maker, posted an unexpected drop in quarterly profit on weakness in its key North American market and forecast more slippage there.

Volvo stock tumbled seven per cent, while DaimlerChrysler shed two per cent and Fiat dropped 1.8 per cent. Peugeot slipped 1.8 per cent after a cautious outlook by the company.

DaimlerChrysler is due to provide a quarterly update on its non-Chrysler operations later in the day.

By 1035 GMT the pan-European FTSEurofirst 300 index was 0.3 per cent lower at 1,581.56, after falling to an intra-day low of 1,572.2. Europe's benchmark index shed 1.5 per cent on Tuesday.

Banks and insurers were also in negative territory, weighed down by concerns over the credit market and contagion from the crisis in high-risk US sub prime mortgages.

Deutsche Bank lost 1.4 per cent, while Credit Suisse shed 1.9 per cent.

The fall in European shares followed a sharp drop on Wall Street overnight on rising concerns over the housing market and disappointing corporate results.

The retreat is clearly due to the subprime crisis and the problems we see in the CDO (collateralised debt obligation) market, that is investors' main worry currently," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.

"There is no liquidity in the market, no pricing. All that is causing increasing risk aversion, and equities are a risky asset class," he said.

"All the good corporate news is completely upset by these concerns."

Around Europe, Germany's DAX index was down 0.9 per cent, the UK's FTSE 100 index was up 0.05 per cent, and France's CAC 40 was down 0.4 per cent.

Hermes International dropped three per cent after the French luxury goods group warned that full-year profits would fall short of forecasts, citing a slowdown in Japan and unfavourable currency movements.

Among gainers, Business Objects rose 3.7 per cent after the software company tripled quarterly profit and sales topped forecasts.