Europe shaken by accounting fears

LONDON, England (CNN) -- European markets ended lower on Monday as corporate profit and debt concerns eroded investors' confidence, which had already been hurt by new accounting discrepancies in the United States.

London's FTSE 100 slipped 0.3 percent to 4,601.3 and the CAC 40 blue chip index in Paris lost 0.1 percent to 3,858.35, while Frankfurt's electronically traded Xetra Dax was down 1.2 percent to 4,430.34 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 0.6 percent, with the computer services and beverages sub-sectors leading declines, while steel and telecom stocks rose.

Wall Street was also lower early in the session, after rallying on Friday, as new accounting problems surfaced in Corporate America.

Merck, the second-largest U.S. drug maker, revealed that more than $14 billion, or 10 percent, of revenue from its pharmacy-benefits business reported since 1999 was never actually collected by the company. (Full Story)

Another U.S. company, power generation and energy trading group Reliant Energy, late on Friday restated its accounts for the past three years, wiping out $7.9 billion in revenue .

Vivendi Universal (PEX), Europe's biggest media company, rose 5.8 percent to 18 euros after the group said it expected an agreement soon to resolve its short-term liquidity problems.

But credit ratings agency Moody's Investors Service said its ratings on the company could face a severe downgrade if its liquidity problems did not improve in the near future. (Full story)

Vodafone Group (VOD), Europe's biggest mobile phone company, gained 2.1 percent to 93.35 pence after reports that it may have to pay more than 5 billion euros ($4.9 billion) to buy Vivendi Universal's 44 percent stake in Cegetel to complete a hole in its western European footprint. (Full story)

Meanwhile, France Telecom (PFTE) dropped 2.6 percent to 14.95 euros, but off its lows for the session. On Friday, Fitch Ratings downgraded the group's short-term and long-term credit rating over liquidity concerns and its ability to meet debt payments. Investors are also concerned about the prospect of disappointing mobile subscription figures for French operators later this week.

Diageo (DGE), the world's biggest spirits group, fell 3.8 percent to 797.37 pence after warning it had been hit by worsening economic and political conditions in Latin America. But it also said performance in North America, Britain, Ireland and Spain was in line with expectations in its financial second half to June 30. (Full story)

UK retailer Kingfisher (KGF) was lost 2.4 percent to 302.58 -- after notching up earlier gains. On Monday, investment bank Rothschild said its offer for French home improvement chain Castorama was "fair." Castorama shareholders had complained the bid was too low. (Full story) Castorama shares were up 2.7 percent to 65.85 euros.

Scottish & Southern Energy (SSE), added 3.3 percent to 674.50 pence on reports that Germany's E.ON (FEOA) was considering a seven billion pound ($10.64 billion) bid for the British utility. (Full story) E.ON was down 3 perent to 58.01 euros in latre Franfurt trading.

Credit Suisse Group, Switzerland's second-largest bank, fell 1.5 percent to 4710 Swiss francs after Moody's said late on Friday it changed to negative from stable its rating outlook for the group because of the performance of its insurance subsidiary Winterthur.

The AEX index in Amsterdam lost 0.8 percent and Milan's MIB30 index fell 0.6 percent, while the SMI in Zurich declined 0.4 percent.

In the U.S. on Monday, markets posted early losses as investors pondered drugmaker Merck's accounting problems and expressed disappointment with weaker-than-expected quarterly report from aluminum producer Alcoa.

At midday, the Dow Jones industrial average was down 31.50 points, or 0.3 percent, to 9,348, while the Nasdaq composite index was off 12.92 points, or 0.9 percent, to 1,435.4.