Eurostocks hit eight-month lows

LONDON, England (Reuters) -- European shares were mired at eight-month lows late on Tuesday as Wall Street succumbed to renewed worries about U.S. corporate governance.

The rout in Europe was broad-based, led by heavyweights such as Finnish mobile phone giant Nokia, Dutch bank ING and French drug manufacturer Sanofi-Synthelabo.

The FTSE Eurotop 300 index finished down 1.9 percent at 1,144.36, its lowest close since mid-October, as decliners beat advancers by about five-to-one.

The narrower Euro Stoxx 50 index of Europe's 50 biggest companies tumbled 3.6 percent.

The CAC 40 blue chip index in Paris closed at 4065.88, down 3.8 percent, while Frankfurt's Xetra DAX-30 closed at 4625.79, down 2.57 percent.

On Wall Street, the Dow Jones industrial average tagged another 0.5 percent loss on to Monday's 2.2 percent fall, while the tech-studded Nasdaq edged up 0.4 percent after tumbling 3.3 percent on Monday.

The U.S. market was aggravated by a report that Knight Trading group, a Nasdaq share dealer, was under investigation for improper trades during the technology boom.

Its stock plunged 19.3 percent.

"We have a sell-off of basically everything today. Nothing is resisting really," said SG Securities European equity strategist Alain Bokobza.

Volumes were light, however, with London closed for a public holiday.

"It's very thin volume: it's like a buyers' strike, with people afraid of everything," said a trader at a German bank.

Tech, media and telecoms stocks were the day's biggest losers amid lingering doubts about the timing of a recovery in technology spending.

Earlier, Singapore-based contract manufacturer Flextronics warned it would miss analysts estimates for the current quarter because of a continued spending slump. (Full story)

Nokia was one of the tech sector's biggest losers, shedding 5.3 percent to a three-year low of 13.89 euros.

Deutsche Telekom, Europe's largest telecom operator, fell below 11 euros for the first time since listing in 1996 after it failed to win a 6.5 billion euro order from the German government. It finished off 4.2 percent at 11.02 euros.

France Telecom, which went ex-dividend on Tuesday, lost 5.9 percent to a year-low of 18.54 euros, while European media leader Vivendi Universal tumbled 6.5 percent.

Video games manufacturer Infogrames Entertainment sank 8.9 percent before saying it had no plans to tap the market for funds to help reduce its high debt levels.

Banking sector under pressure

The heavyweight banking sector lost almost two percent as investors worried that the market downturn meant bad news for banks' investment business.

German bank Commerzbank sank 4.8 percent to 17.80 euros, approaching its year low of 17.25, while Dutch bank ING lost 4.9 percent to 26.70 euros and France's Societe Generale shed 3.5 percent.

French drug makers Sanofi-Synthelabo and Aventis both fell sharply after a U.S. survey showed growth in prescription drug spending in 2002 was expected to slow from 2001 and should continue to drop in the years ahead.

The survey, by the largest U.S. pharmacy benefits manager Express Scripts, showed drug spending would rise 15.9 percent this year from 16.9 percent in 2001.

Sanofi tumbled 4.8 percent to close at a year-low of 59.95 euros and Aventis sank 6.2 percent to 69.20 euros, also its worst finish in a year.

Shares in French-Spanish tobacco firm Altadis fell 3.0 percent in Madrid after reports that the Spanish government was preparing a host of anti-smoking measures. Altadis's Paris listing shed 1.8 percent.

Newspapers reported that Spain's government was planning measures, including price rises and restrictions on advertising, to curb smoking.

Risk aversion

Sentiment in global equities has withered as strategists scale back their expectations that the nascent global economic recovery will bolster corporate profits before the end of this year.

Those woes have been compounded by concerns about corporate governance in the United States after a string of scandals from the collapse of Enron last December to the abrupt resignation of the chairman of Tyco on Monday.

The resulting increase in risk aversion among investors and sharp pullback in U.S. shares has triggered safe-haven buying of gold and prompted a move out of the U.S. dollar into currencies such as the euro and the yen.

Gold hit its highest level since October 1999 earlier on Tuesday when it traded at $330.30, while the dollar slid to a 16-month low against the euro and a two-and-a-half year low against the Swiss franc.