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Bourses lower on technology profit taking

14/09/2004 12:59
European equities were lower on Tuesday as the technology stars of the previous session fell to profit taking, with sentiment weakened by a sharper-than-expected fall in investor confidence.

By mid-morning, the FTSE Eurotop 300 was down 0.3 per cent to 994.23, while Frankfurt’s Xetra Dax shed 0.1 per cent to 3,949.83. In Paris, the CAC-40 was 0.3 per cent lower at 3,714.37 and London’s FTSE 100 slipped 0.1 per cent to 4,552.9.

Germany’s ZEW institute dented sentiment in Europe after it reported its monthly gauge of investor confidence fell more than expected to its lowest in more than a year. The index slumped to 38.4 in September from 45.3 in August.

“The fading optimism originates in the fact that worldwide economic dynamics will decelerate due to ambiguous data from the US,” the institute said in an accompanying statement.

Investors also cast a wary eye on oil prices, which crept higher as Hurricane Ivan approached Gulf of Mexico platforms. Brent crude on London’s International Petroleum exchange was up 27 cents to $41.33, while Nymex WTI was up to $44.27 from a settlement of $43.87 in the previous session.

On Wall Street, the Dow Jones Industrial Average finished unchanged at 10,314.76, but the Nasdaq Composite ended 0.9 per cent higher at 1,910.38.

Telecoms stocks were among the worst performers after TDC, Denmark’s leading service provider, shed 3.6 per cent to DKr212.25 after reporting it had offered DKR4.1bn ($552m) for Song Networks Holding, the Nordic telecoms operator.

Vodafone and MM02, the UK mobile operators, and TIM, their Italian peer, were lower after downgrades from Citigroup Smith Barney. The investment bank cut Vodafone to “sell” from “hold”, knocking its shares 2.1 per cent lower to 130.5p, while MM02 slipped 1.1 per cent to 93.5p after a similar downgrade. TIM, also cut to “sell” from “hold”, fell 0.5 per cent to €4.46.

“At the start of the year we made several downgrades to “hold” to reflect our concerns on the economics of the 3G transition,” analysts from Citigroup said in a research note. “Following recent tentative rallies and with launches imminent from several operators we are turning more bearish.”

This had a knock on for the fortunes of the mobile handset makers, which have invested greatly into the development of units capable of operating 3G technology. Ericsson was down 1.4 per cent SKr21.20, while Nokia slipped 0.9 per cent to €11.22.

France Telecom, which also owns mobile operator Orange, was down 0.5 per cent to €19.96, while TeliaSonera, the Swedish telecoms company slid 1.1 per cent to SKr35.80.

Vivendi Universal, the Paris-listed media and entertainment company, reported a wider first-half net loss after currency translation losses related to its deal earlier in the year with NBC of the US. Strength in its SFR mobile telecoms operations helped drive operating profit higher however, and the company was upbeat about prospects for the full year. Its stock fell 0.3 per cent to €21.63.

Chip-related stocks were also lower after being among the best performers on Monday. ASML, the Dutch chip equipment maker - up 4.1 per cent on Monday, shed 0.9 per cent to €11.45 as investors took profits in the wake of a downgrade. Deutsche Bank lowered its rating to “hold” from “buy” and reduced its price target to €11 from €16.

Elsewhere in the sector, STMicroelectronics was down 0.7 per cent to €14.92, while Infineon was off 1.4 per cent to €8.35.

Lafarge, the French cement maker, fell 2.2 per cent to €72.45 after Bernard Kasriel, chief executive was reported to have said that forecasts by analysts on the group’s full year results were overly optimistic.