Europe Markets

Stocks Tumble 1.4% as GE Spooks Market

Reuters
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European stocks ended down 1.4 percent on Friday, their biggest one-day drop since mid-March as a profit warning by General Electric rattled investors and cemented the view that the US economy was tipping into recession.

Industrial stocks took a beating, with Siemens losing 3.4 percent, and Rolls-Royce falling 3.2 percent.

The FTSEurofirst 300 index of top European shares ended down 1.4 percent, at 1,284.71 points, its lowest close since March 31 and its fourth negative session in a row.

The index ended the week with a loss of 2.6 percent.

"GE's results confirm our view that the consensus is still way too high for 2008 and that forecast downgrades will continue, and dampen the market's recent enthusiasm," said Romain Boscher, head of equity management at Groupama AssetManagement, in Paris.

GE, viewed as an economic bellwether because of its range of businesses, posted an unexpected 6 percent drop in quarterly profit and cut its full-year profit forecast from continuing earnings, quashing European shares' early recovery from a three-day drop.

"These results confirm that the slowdown is widespread and beginning to impact capex (capital expenditures) and longer-cycle businesses," said Stephen Surpless, senior analyst at Cantor Fitzgerald in London.

"While the credit crisis might be nearer to the end than the beginning, according to some, the impact on the real economy is taking place and is unlikely to abate in 2008," he added.

General Electric is the parent company of CNBC.

UK telecoms group Vodafone was the biggest laggard among Europe's blue chips, down 4.3 percent. Morgan Stanley analysts said the stock did not appeal to them compared with KPN, TeliaSonera or France Telecom after meeting EU officials on routing costs.

Other telecoms retreated, with Telefonica down 2.8 percent, and Deutsche Telekom down 1.8 percent.

BAE Systems tumbled 4.9 percent. A London court said on Thursday a corruption investigation into arms deals with Saudi Arabia should not have been halted.

European stocks also got hit by data showing that US consumer confidence fell to its lowest in more than a quarter century in early April.

The Reuters/University of Michigan Surveys of Consumerssaid its preliminary index of confidence fell to 63.2 in April from 69.5 in March. This was well below economists' median expectation of a reading of 69.0, according to a Reuters poll.

Around Europe, Germany's DAX index fell 1.5 percent, UK's FTSE 100 index dropped 1.2 percent and France's CAC 40 lost 1.3 percent.

Among the few stocks on the upside, crop protection and seeds company Syngenta gained 1.6 percent, benefiting from rival DuPont's bullish profit forecast on Thursday and booming agricultural markets.

French telecoms and construction group Bouygues rose 2.4 percent following an upgrade by Morgan Stanley. The brokerage raised its recommendation on the stock to "overweight" from "equal-weight," saying in a note: "We now think the bear case recession scenario is priced in."