By Peter Starck
FRANKFURT, Jan 23 (Reuters) - European shares fell on
Wednesday, wiping out some of the previous session's gains
sparked by a big cut in U.S. interest rates, as worries over
earnings and more bad debt write downs at banks took hold.
Economic data showing that euro zone services sector growth
slipped more than expected in January while manufacturing
activity steadied at subdued levels also depressed sentiment.
French bank Societe Generale <SOGN.PA>, down 3 percent, was
among leading blue-chip decliners in Europe. Lehman Brothers
said in a research note it remained "cautious" on the SocGen
stock, which it rates "underweight", due to write-downs.
Going in the opposite direction, Swiss Re <RUKN.VX> rose 8.5
percent. The company said it would increase its buyback
programme after signing a reinsurance contract with U.S.
investor Warren Buffett's Berkshire Hathaway <BRKa.N>, which
also bought 3 percent of Swiss Re's shares.
At 1015 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.4 percent at 1,299,65 points, having
opened clearly higher and later taken a roller-coaster ride in
an unusually wide range: from 1,285.07 to 1,324.77 points.
"There's some nervousness out in the market because although
we had the rate cut in the United States, which was a positive
start to trying to put things on hold, people think the credit
crunch isn't over," said Mark Foulds, a trader at Tradindex.
"The fact the market has come off this morning shows us that
there is still a lot of downbeat news to come and that there's a
lot of negativity out there," he added.
Insurance was the best performing sector, 1.9 percent higher
on the DJ Stoxx index <.SXIP>.
BANKS GAIN AFTER FED MOVE
Among banks, which many analysts see as among the leading
beneficiaries of the Federal Reserve's 75-basis-point key rate
cut on Tuesday, HSBC <HSBA.L> rose 3.2 percent and Royal Bank of
Scotland <RBS.L> gained 2.3 percent.
Among losers, German chipmaker Infineon <IFXGn.DE> fell 5.9
percent after its subsidiary Qimonda <QI.N> almost doubled its
operating loss last quarter.
Shares in Swiss luxury goods group Richemont <CFR.VX> fell
5.1 percent after the company narrowly missed market forecasts
with an 8 percent rise in third-quarter sales.
"The uncertainty about corporate earnings growth in 2008 has
risen, not only in the financial sector but also elsewhere. The
markets are expecting a flood of profit warnings in the next few
months," said Matthias Schellenberg, managing director at ING
Investment Management.
The RBS/NTC Flash Eurozone Services Purchasing Managers
Index fell to 52.0 in January from 53.1 in December, its lowest
since August 2003 and well below economists' forecasts of 52.8.
The survey also found that the equivalent factory PMI
remained at the same level as December's 52.6, considerably
above forecasts of a drop to 52.0.
"The PMI report confirms that the pace of slowing in the
economy is larger than that embedded in the ECB's (European
Central Bank) staff forecasts. With further declines in the
composite PMI on the cards in the coming months, the pressure on
the ECB to ease will continue rising," said Jacques Caillous,
head of euro area economics at RBS, which compiled the survey.
ECB President Jean-Claude Trichet told the European
Parliament on Wednesday that it was the responsibility of the
central bank "to solidly anchor inflation expectations to avoid
additional volatility in already highly volatile markets."
"Also important is for the central bank to ensure an orderly
functioning of the money markets at the level of interest rates
required for anchoring the inflation expectations," he said.
Around Europe, Britain's benchmark FTSE 100 index <>
fell 0.2 percent, the German DAX <> was down 1 percent and
the French CAC 40 <> lost 0.4 percent.
(Editing by Louise Ireland/Elizabeth Fullerton)
