European stocks eased yesterday as bad-loan worries bedeviled financials and techs were hit by fresh recovery doubts, but Vivendi climbed after it beat out Vodafone in their French mobile phone contest.
Investors squirrelled some cash into traditionally safer havens of food and beverages, utilities and health care stocks to temper the broader market's losses.
By 1630 GMT with only Frankfurt still officially trading, the FTSE Eurotop 300 index was down 0.6 per cent at 914 points, while the DJ Euro Stoxx 50 index shed 0.44 per cent to 2,573 points.
Declining issues outpaced advancers by a narrow margin on good volume. The market is up about 16 per cent since early October's five-and-a-half-year low.
Much of the money has gone into techs and other "high-beta" stocks whose moves are typically more exaggerated than the broader market despite little sustained recovery in the economic and corporate outlooks, fund managers said.
"What a lot of companies say has not changed. Their top lines are not feeling particularly perky at the moment, and this sort of thing is going to carry on," said Michael MacPhee, head of large cap European equities at Baillie Gifford.
The European Central Bank meets today when it is widely expected to cut euro zone interest rates by up to 50 basis points as the economy shows a patchy recovery at best with its biggest hitter Germany suffering.
"It would quite a shock if they did not cut," MacPhee said. Euro-zone rates have been pegged at 3.25 per cent since last November, with a 25-basis-point cut seen as already discounted by stocks.
"Money is cheap enough, and making it cheaper would, at the margin, be of some benefit to the several companies that are heavily indebted, but it does not fundamentally change the prospects for profits."
"Interest rates is not what it's about. There is an imbalance between supply and demand and it's difficult for companies to raise prices. It's good for the consumer but not for profits."
On Wall Street, the Dow Jones industrial average fell 0.7 per cent to 8,682 points, while the tech-studded Nasdaq Composite shed 2.25 per cent.
New York's losses came despite the US services sector surging in November to its best reading in six months, while worker productivity grew in the third quarter ran at its fastest pace in nearly three decades, bolstering hopes of continued economic recovery.
France Telecom fell 3.9 per cent to €16.22 as investors readied for the outcome of a key board meeting taking place yesterday, which they hope will deliver details on a long-awaited refinancing plan for the €70 billion indebted operator.