Europe ends lower on rate jitters

March 21, 2002 Posted: 1:58 PM EST

LONDON, England (CNN) - European markets ended lower on Thursday after growing concerns at a possible hike in U.S. interest rates overshadowed positive results in the telecom and retail sectors.

London's FTSE 100 fell 0.3 percent to 5,253.3 and the CAC 40 blue chip index in Paris lost 0.5 percent to 4,579.9, while Frankfurt's electronically traded Xetra Dax was down 0.8 percent at 5,322.7 in late trading (the German market was set to close at 1900 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 0.3 percent, with the electronics and computer sectors leading the declines.

"For the market to be able to shrug off interest rate hikes you need to have a strong profit profile and good balance sheets and in neither of those cases, at the moment, is that necessarily the case," Philip Isherwood, a global equity strategist at Dresdner Kleinwort Wasserstein, told Reuters.

Among the big losers on Tuesday was French media giant Vivendi Universal(PEX), which lost 2.8 percent after it said it had no plans to buy back its stock in 2002.

German utility E.ON (FEOA) was down 2.7 percent in late trading in Frankfurt, after saying it expected a slight increase in group sales in 2002. But investors pushed its stocks lower as rival RWE appeared to have received approval from the board of UK power group Innogy for RWE's $4.4 billion bid. RWE (FRWE) was up 1.9 percent in late trading, while Innogy (IOG) rose 3.1 percent in London.

Telecom stocks were strong on Thursday, lifted by France Telecom (PFTE), Europe's second largest phone company. It rose 1.5 percent after it said it had no need to tap markets for fresh capital and would sell assets worth 8 billion euros to reduce debt.

France's dominant phone company posted its first ever net loss since floating in 1997 after slashing the value of acquisitions by 10.2 billion euros. Its Orange mobile phone unit jumped 3.9 percent, making it the top gainer in Paris.

France Telecom's mobile phone partner MobilCom (OMOB) was down 22.1 percent in late trading in Frankfurt after Germany's fifth-largest mobile phone group posted larger-than expected core losses.

Britain's Vodafone (VOD), the world's biggest mobile phone company, gained 0.9 percent, while German's Deutsche Telekom (FDTE) was up 0.5 percent in late Frankfurt trading.

The UK's third largest clothing retailer Next (NXT) was the top performer in London, jumping 7 percent, after posting a 22 percent rise in pretax profits. Upmarket department store chain Selfridges (SLF) gained 5 percent after it posted a better than expected 16 percent rise in annual profit.

Zurich Financial dropped 2 percent after Europe's third largest insurer issued a cautious outlook for the future, failing to confirm its earnings expectations and made no mention of a new chief executive officer.

In Amsterdam the AEX index fell 0.1 percent and the SMI in Zurich was 0.2 percent lower, while Milan's MIB30 index was up 0.3 percent.

In the U.S. on Thursday, Wall Street was down at midday after a business confidence survey showed new orders slipped in March from the previous month and another report said consumer prices rose for a second straight month in February.

The data added to investors' jitters that began after the Federal Reserve this week laid the groundwork for future interest rate hikes.

At midday, the Nasdaq composite index was down 4.3 points, or 0.2 percent, to 1,828.57, while the Dow Jones industrial average lost 122.13 points, or 1.2 percent, to 10,379.44.

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