Vivendi woes hit Europe bourses

LONDON, England (Reuters) -- European stock markets closed lower on Wednesday, as fresh liquidity concerns best France's Vivendi Universal, whacking its shares to a multi-year low.

Shares in Ericsson also fell heavily and dragged on the tech sector as traders reassessed the telecom equipment maker's financial health in the light of its pending jumbo rights issue and the uncertain economic outlook.

By 1542 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips had dropped 2.7 percent to 928 points, as investors looked ahead nervously to key U.S. data due later in the week after the U.S. central bank hedged its bets on Tuesday.

In London, the FTSE 100-share index closed down 100.6 points, or 2.4 percent, at 4,171.1.

Paris' CAC 40 index slumped 4.4 percent, or 149.4 points, to 3,240.81, while the Xetra Dax in Germany fell 3.2 percent, or 118 points, to 3,565.0.

Credit Suisse led the leading Swiss blue-chip index lower after the Swiss bancassurance group posted weak first-half figures as it was hit by heavy losses in its insurance business.

Zurich's SMI index ended down 1.1 percent at 5,266.8 points.

In Milan, Italian blue-chips lost more than three percent ahead of a national holiday, with ST Microelectronics hit by negative sentiment and Seat Pagine Gialle by a rival's poor results.

The all-share index Mibtel fell to close down 2.6 percent, or 483 points, at 18,278, while the blue-chip Mib30 index was 3.1 percent lower at 24,761.

The Dutch blue chip AEX index of 24 most active shares finished down 2.86 percent at 347.22 points.

"The markets have lost confidence in the growth outlook and comments from the Fed overnight suggest they have too, so short-term there are still risks because the data flow could be negative," said Saul Henry, equity strategist at UBS Warburg.

The narrower DJ Euro Stoxx 50 index slid 4.3 percent to 2,585 points, taking its losses so far in 2002 to 32 percent.

However, that still left both benchmarks some way off the five-year lows plumbed on July 24.

Trading volumes were low as many market players were away from their desks, due to the August holiday period and the onset of Assumption Day on Thursday in many parts of Europe.

Investors punished Vivendi after the media giant confirmed it was facing around 5.6 billion euros in refinancing requirements by the year-end.

That helped turn the morning's retreat into a rout, as the share price lost around 25 percent, wiping 13 billion euros off the company's market value.

Vivendi earlier revealed a bigger-than-expected 11 billion euros in goodwill impairment charges alongside its half-year results and saw its credit ratings cut to "junk status" by Standard & Poor's.

The battered media sector also had its upbeat moments, though, as Dutch business publisher VNU confounded its own forecasts with a three percent rise in cash first-half earnings per share and forecast similar full-year growth.

That sent its shares up 12.5 percent and helped fellow Dutch group Wolters Kluwer extend its good run after the niche business publisher also posted upbeat earnings on Tuesday.

More tech trouble

The DJ Stoxx technology index was neck and neck with media as the session's worst performing sector after U.S. chip gear maker Applied Materials warned that its orders could drop by as much as 15 percent in the next quarter.

"Technology stocks are high-beta, meaning they exaggerate the market's movements. When volumes are as low as they are today it only takes a bit of bad news like the Applied Materials warning to send stocks spinning," said one technology analyst.

Dutch chip equipment maker ASML dropped 9.5 percent and compatriot Philips slid seven percent.

Telecom equipment maker Ericsson was also hit by lingering concerns about its cash outflow, despite its upcoming rights issue.

"Ericsson could have a 53-49 billion (Swedish crown) non-trading related cash outflow, totally eliminating the 28.9 billion (crowns) the company expects to raise from its rights issue and eating into its liquidity pile to support its core trading requirements," said credit analysts at Bear Stearns in a note.

Shares in Ericsson slumped 10.6 percent, while those in Finnish rival Nokia lost 7.1 percent.

Elsewhere, Credit Suisse off loaded 3.7 percent after the Swiss bancassurer reported a heavier-than-expected loss for the second quarter.

Big picture worries

On Wall Street, the Dow Jones industrial average was 1.2 percent lower while the tech-heavy Nasdaq Composite added 0.4 percent.

The Federal Reserve left U.S. interest rates on hold on Tuesday but warned that the risks have tilted toward weakness in the world's biggest economy.

Data showed U.S. business inventories rose by 0.2 percent in June against expectations of no change, but had little material impact on markets.

However, the more influential industrial production report and Philly Fed survey is due on Thursday, with the University of Michigan survey of consumer sentiment set to follow on Friday.

And with recent data pointing to a recovery slowdown in the world's biggest economy and narrowing the odds of a "double-dip" recession, investors will be hoping for some better news.

"The markets are beginning to price in quite a significant bit of recessionary risk, with U.S. bond yields down to 40 year lows and euro bond yields down to September 11 levels, but we need to see some of the consumer and business confidence surveys at least beginning to form a base," said UBS Warburg's Henry.