By Peter Starck
FRANKFURT, March 13 (Reuters) - European shares fell on
Thursday as financial sector woes weighed on banks such as
UniCredit <CRDI.MI> while the high oil price took its toll on
airlines and euro strength hurt exporters, notably carmakers.
Leading indexes trimmed steep intraday losses, however,
after credit rating agency Standard & Poor's said in a report
released late in the European trading day that an end to
writedowns was now in sight for big financial institutions.
Some strategists nevertheless warned that the negative
impulses that have hammered stock markets for months could
continue to haunt investors.
"The adverse effects from the troubles in the credit market
are growing worse, the U.S. economy is in recession, Europe is
slowing down but Asia is still holding up," said Wolfgang
Hoetzendorfer, chief investment officer at State Street Global
Advisors in Germany.
"There will be an impact on equity markets through slower
corporate earnings growth," he said.
"The financial crisis is dragging on longer than
anticipated, commodity prices and the euro remain high and there
are persistent worries of a recession in the U.S.," DZ Bank
analyst Christian Kahler wrote in an equity strategy note.
DZ Bank cut its forecasts for the DJ EuroStoxx 50 index
<> to 4,000 points on a six-month horizon and 4,100
points in 12 months from 4,450 and 4,600 points earlier.
That index of European blue-chip shares fell 1.3 percent on
Thursday to 3,599.58 points. The broader FTSEurofirst 300 index
<> closed 1.3 percent lower at 1,268.46 points, taking its
losses for the year to 15.8 percent.
With UniCredit down 4 percent, the DJ Stoxx bank index
<.SX7P> was the leading sectoral loser with a drop of 2.8
percent. UniCredit posted slightly lower-than-expected profits
and said it could no longer confirm an earlier 2008 earnings per
share (EPS) target.
Cazenove cut its 2008 and 2009 EPS estimates for UniCredit
by 7 percent and 8 percent, respectively, citing a lower
contribution from the Italian group's investment bank division.
Also among financials, which have been hit the worst by the
credit market crunch rooted in the U.S. subprime mortgage market
meltdown, Royal Bank of Scotland <RBS.L> fell 4.6 percent, UBS
<UBSN.VX> lost 3.8 percent and Fortis <FOR.AS> shed 3.5 percent.
The bank index was down as much as 4.7 percent earlier in
the session but recovered on the back of the S&P report, which
said: "The positive news is that, in our opinion, the global
financial sector appears to have already disclosed the majority
of valuation writedowns of subprime asset-backed securities."
HIGH OIL, STRONG EURO
U.S. crude oil rose to a record high of $111.00 a barrel
<CLc1>, pulling down shares in European airlines. British
Airways <BAY.L> dropped 5 percent, Spain's Iberia <IBLA.MC> was
down 4.1 percent and Air France-KLM <AIRF.PA> fell 3.6 percent.
The travel & leisure index <.SXTP>, which includes airlines,
was the second worst sector, down 2.6 percent.
The euro climbed to a new high above $1.56 <EUR=>, dampening
export prospects for European manufacturers such as carmakers
and their suppliers. The sector index <.SXAP> fell 2.2 percent.
Auto parts supplier Continental <CONG.DE> fell 4.8 percent
on news that problems at the power-train business it bought as
part of the Siemens VDO deal were larger than first thought.
BMW <BMWG.DE> fell 3.6 percent after the world's largest
premium carmaker reported 2007 results that narrowly beat market
expectations but also announced the departure of its sales and
marketing chief, the group's former chief financial officer.
"The numbers were all right but it seems the news that the
sales and marketing chief is leaving is not going over so well,"
a Frankfurt-based trader said.
Among rare gainers, Nestle <NESN.VX> rose 6.2 percent after
the world's largest food group raised its growth outlook.
"This announcement came as a surprise, and it is very early
for the group to raise guidance unless it is very confident in
its outcome," Barclays Wealth said in a note. "Nestle also
delivererd a strong performance in 2007, so this news can be
seen as very positive."
Elsewhere in the food sector Danone <DANO.PA> rose 3.5
percent and Unilever <ULVR.L> added 2.9 percent.
Ferrovial <FER.MC> rose late in the session to close up 5.2
percent, driven higher by healthy passenger figures for British
airports in 2007 released by the Civil Aviation Authority.
"Recent newsflow on Ferrovial has been very positive such as
the new tariff scheme at its British airports and now traffic
data from its London airports. The stock has suffered in the
past and now it's making up lost ground," said Celine Giffard,
analyst at Self Trade Bank in Spain.
(Additional reporting by Sitaraman Shankar in London and Jesus
Aguado in Madrid; editing by Elaine Hardcastle)
