European shares slid sharply yesterday after consumer products giant Unilever and brewer Heineken warned on sales, rekindling investor concern about the health of corporate earnings.
A retreat on Wall Street, where the tech-rich Nasdaq Composite index tumbled over two per cent, added to already negative European stock-market sentiment and convinced investors to cash in on gains made during the recent rally.
"The markets have already priced in a profit recovery in the second half of 2003, and shocks like that given by Unilever today do not help investor confidence," said a Munich-based fund manager.
By 1558 GMT, with only Frankfurt's DAX still officially trading, the DJ Euro Stoxx 50 index had shed 2.64 per cent to 2,448 points and the pan-European FTSE Eurotop 300 lost 1.73 per cent to 861 points.
The Unilever-led DJ Stoxx food and beverage sector did most damage, falling over 4.82 per cent, with declining insurance stocks and weak European auto shares adding to the market woes.
Around Europe, Paris' CAC-40 index was 2.22 per cent lower, London's FTSE fell 1.74 per cent while Zurich was down 2.25 per cent.
Germany's DAX, Europe's best-performing major index over the past three months having gained over 17 per cent, was 1.87 per cent lower.
In New York, the Dow Jones industrial average was 1.63 per cent lower and the Nasdaq Composite stood 2.26 per cent weaker.
Shares in Anglo-Dutch consumer products giant Unilever sagged as much as 11.3 per cent after it cut its 2003 target sales growth rate for its 400 top brands to four per cent from five-six per cent after slower-than-expected first-half growth.
Comments that Unilever still expected to meet its 2003 earnings target of low double-digit per centage growth failed to soothe investors concentrating on the top-line news.
Earlier, brewers had wobbled after Heineken said sales volumes in the first half were below its expectations and first-half net profit excluding exceptional items would be around the same level as in the first half of last year.
Heineken shares slid 12.86 per cent in heavy volume, wiping over 1.7 billion euros from the group's market value and hitting rivals such as Denmark's Carlsberg and London-listed shares in South Africa's SABMiller.
Shares in Interbrew fell as much as 4.68 per cent in heavy trade as investors worried about a trading update due on Wednesday in the wake of the Heineken warning.
SABMiller's London-listed stock closed 5.37 per cent down. In the European auto sector, carmakers such as Volkswagen fell after the German autos industry association VDA said it was sticking to its forecasts of roughly flat car sales in Europe's biggest auto market this year, pinning its hopes on a recovery in demand in the second half of the year.
Other heavily weighted decliners included French pharmaceutical group Sanofi-Synthelabo, off 4.76 per cent on concern that its withdrawal of one of the patents protecting its top-selling blood thinner from a patent infringement lawsuit may boost the case for generic drugmakers.
Volume was low on European stock markets yesterday amid a dearth of major economic data and as investors held back before Wednesday's US rate decision, waiting to see how far the Federal Reserve will go to ensure the economy picks up.