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Bourses end lower as rebound comes to a halt
By Philip Stafford, FT Investor
Published: July 23 2002 12:18 | Last Updated: July 23 2002 17:35

European markets headed for fresh five-year lows in late trade on
Tuesday as bad news from the financial sector spooked the markets
for the second day running.

The falls were largely triggered by Belgian-Dutch banking group
Fortis, which issued a profit warning, and Swedish finance house
Skandia, which said June sales fell to $930.6m, lower than analysts'
estimates.

Coming a day after a warning from Dutch insurer Aegon, the alerts
sent the rest of the banking and insurance sectors lower. Telecoms were also marked down in
the afternoon sell-off, which more than erased an earlier rebound.

The pan-European FTSE Eurotop 100 was trading 1.8 per cent lower at 1,921.1 at the London
close, heading for its lowest close since April 1997.

The Dow Jones Industrial Average bucked the trend to add 0.9 per cent, but the Nasdaq
Composite was 0.4 per cent higher.

London's FTSE 100 closed down 1 per cent at a fresh six-year low and Paris's Cac 40 fell 2.5
per cent. In Frankfurt, the Xetra Dax 30 shed 3.2 per cent.

On the new markets, the FTSE Techmark was 0.4 per cent weaker and the Nemax down 1.3 per
cent.

Investors on both sides of the Atlantic were unsettled by a number of weak earnings reports,
particularly from major Dow component Bristol Myers-Squibb, the pharmaceutical group. In
Europe, GlaxoSmithKline fell 1.4 per cent to pounds 10.56 and Sanofi-Synthelabo closed down 5 per
cent at euros 52.25.

Some commentators attributed the poorer performance of European markets compared with the
US over recent sessions partly to a repatriation of US money back to the States.

"US funds seem to be bringing money home and there's some talk of needing dollars for margin
calls," said Paul Bednarczyk, a strategist at 4Cast in London. "In the longer term, I'd still rather
have money in the US than in Europe but at the moment I'm not keen on either," added Mr
Bednarczyk.

The dollar strengthened against the euro which fell below the $0.99.

Financial stocks were in focus after Belgian-Dutch banking group Fortis warned that because of
the weak equity markets, the value of its portfolio had fallen below purchase value for the first
time in its history.

The company said its solvency position remained good but warned full-year results would be
affected if markets remained soft, and its shares fell 8.7 per cent in Amsterdam to euros 14.10. The
warning comes a day after a similar announcement from Dutch group Aegon., which lost a
further 11.7 per cent at euros 12.29.

Swedish group Skandia fell 12 per cent to SKr25.80 after it said June sales fell to $930.6m,
lower than analysts' estimates, owing to weakness in the equity markets.

Prudential, Axa and Royal & SunAlliance were among the top decliners as insurance stocks bore
the brunt of the sell-off. Prudential fell 8 per cent to 42p, Axa lost 7.5 per cent at euros 11.18 and RSA
shed 10.6 per cent to 170p. Munich Re fell 6.1 per cent to euros 174.

Swedish telecoms equipment maker Ericsson, the most actively traded stock by volume in Europe
on Tuesday, was down 7.5 per cent at SKr11.10 after Moody's cut its credit rating to BBB-, one
notch above junk status. US peer Lucent added to the gloom when it said it would take a $5.83bn
non-cash charge in its second-quarter results and said it saw no upturn in the market. Finland's
Nokia fell 7.1 per cent to euros 11.80.

Arm Holdings, the UK chip designer, was the top gainer in Europe, gaining 9.1 per cent at 144p
after it reported record licence revenues in its second quarter and said it was confident growth
could be maintained for the rest of the year.

Chip stocks were in focus ahead of second-quarter sales from French-Italian semiconductor
maker STMicroelectronics, due at 2200 GMT. STMicro reversed earlier gains to close 1 per cent
lower at euros 23.01 and rival Infineon Technologies was also down 1 per cent at euros 15.80. Sentiment
in the sector was unsettled after US chip equipment maker Novellus reported an 80 per cent drop
in second-quarter profits and said customers were becoming more cautious. Dutch chip
equipment maker ASML fell 4 per cent to euros 13.85.

Drug group AstraZeneca, fell 0.9 per cent to pounds 20.25 after it announced it had begun new clinical
trials on its cholesterol drug Crestor. Investors remain concerned that the new trials could delay
the launch date of Crestor on the market.

Swiss biotech group Serono reversed early gains to close 3.6 per cent lower at SwF846 after it
signed an exclusive agreement with AstraZeneca to develop a new female infertility treatment.

Global information provider Reuters rose 0.3 per cent to 300p after reporting its first ever
underlying loss as a listed company, of pounds 88m from a pounds 357m profit a year ago, mainly due to a 38
per cent drop in revenues at Instinet, its electronic broking platform.

French software group Dassault Systemes rose 3.4 per cent to euros 33.09 despite cutting its sales
growth target to around 8 per cent, mainly due to a weak dollar and weak growth in Europe. The
design software maker said net income for the first half fell 3 per cent, before acquisitions, to
euros 30m or euros 0.26 per share.

Vivendi Universal fell 2.4 per cent to euros 15.89 after the company's board on Monday met to
discuss an asset disposal strategy to secure rescue funding for the cash-strapped media group.
Proposals included selling the stake in Cegetel, its French phone network.

Electrical equipment company Schneider Electric jumped 5.2 per cent to euros 43.09 after it said its
exclusive talks with Wendell Investments for its euros 3.7bn sale of Legrand would be extended until
the end of the week. The company also said first-half sales fell 7.2 per cent to euros 4.6bn as
demand for its products remained weak and forecast no pick-up in the second half of the year.