By Amanda Cooper
LONDON, Feb 7 (Reuters) - Technology stocks weighed on
European shares on Thursday after Cisco's <CSCO.O> grim outlook
overnight heightened fears of a U.S. recession and Infineon
<IFXGn.DE> warned of continued losses at its phone chips unit.
Most bank shares were down ahead of two key European
interest rate decisions from the European Central Bank and the
Bank of England, although Deutsche Bank <DBKGn.DE> rose after it
revealed no negative subprime surprises in its results.
Infineon shares fell 9 percent following Cisco's warning of
a rapid slowdown in U.S. and European orders after Wednesday's
closing bell. Cisco shares fell by nearly 10 percent from their
last close to 14.63 euros in Frankfurt <CSCO.F>.
"It is reporting season that is dominating today," said
Achim Matzke, European stock indexes analyst at Commerzbank in
Frankfurt.
"Cisco gave negative comments reporting their forecast so
there is a negative mood spreading to the tech area in Europe.
On the other side we have data out from Deutsche Bank that seems
to be fine. There is no negative (subprime) surprise."
By 0900 GMT, the FTSEurofirst 300 index <> of top
European shares was down 0.9 percent at 1,309.20 points.
Declining issues outnumbered advancers by seven to one.
The index is now down 13 percent so far this year.
Shares in Deutsche Bank, Germany's largest, were up 1.2
percent, making them one of the top gainers among financials,
after the company posted a more than 50-percent decline in
pre-tax profits from its investment banking unit, but unveiled
no subprime surprises.
Santander <SAN.MC> fell 1 percent, after posting a rise in
recurring net profit, but a 1.4-billion euro write-down, half of
which was related to its stake in U.S. bank Sovereign <SOV.N>
HSBC <HSBA.L> lost 0.7 percent, while BNP Paribas <BNPP.PA>
shed 1.4 percent and Deutsche Postbank <DPBGn.DE> fell 2.7
percent, paring some of Wednesday's 11 percent gain on the back
of takeover speculation.
RATE DECISIONS AHEAD
London's FTSE 100 index <> fell 0.9 percent, while
Frankfurt's DAX <> lost 0.9 percent and Paris's CAC 40
<> fell 1.1 percent ahead of the rate decisions from the
ECB and the BOE.
Adding to pressure on European markets was the third fall in
a row on Wall Street on Wednesday after Federal Reserve
officials cast doubt on the prospect of more U.S. rate cuts.
The BoE is widely expected to cut British interest rates to
5.25 percent, while the ECB is expected to leave euro zone rates
at 4.00. Investors will sift through the language of the
post-decision news conference for evidence of a shift in the
bank's stance on inflation.
"The ECB is expected to leave rates unchanged today but it
will be under extreme pressure to downgrade its ultra-hawkish
policy bias and move towards a neutral stance," said Lena
Komileva, G7 economist at Tullett Prebon.
"An unchanged rate decision would be market-neutral against
the unanimous economist consensus but the pressure is on policy
officials to acknowledge that downside risks to euro zone growth
and therefore to medium-term inflation."
Other interest-rate sensitive stocks also fell.
Shares in Unibail/Rodamco <UNBP.PA>, Europe's largest listed
property company, fell 3.7 percent even after reporting a 15.40
percent rise in yearly earnings.
Unilever <ULVR.L> <UNc.AS> shares fell 1.3 percent after the
consumer goods company beat forecasts with a 6.1 percent rise in
fourth-quarter underlying sales.
BG Group <BG.L> shares gained 4 percent, making them the
biggest positive weight on the FTSEurofirst 300 after the gas
producer reported a 25-percent rise in quarterly net profit.
"Overall, today's results and strategy update look set to be
applauded by investors. However, market consensus opinion is
broadly neutral in tone, with analysts of a more negative
persuasion concentrating on valuation issues, given already
significant upside enjoyed by the shares," said Keith Bowman, an
equity analyst at Hargreaves Lansdown Stockbrokers.
Miners were mixed despite persistent merger and acquisition
activity within the sector.
BHP Billiton <BLT.L> lost 1.9 percent after its sweetened
but hostile $147.4 billion bid for rival miner Rio Tinto <RIO.L>
was rejected late on Wednesday. Rio fell 1.7 percent.
Antofagasta <ANTO.L> and Anglo American <AAL.L> were up
between 0.2 and 1.5 percent.
(Editing by Paul Bolding)
