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Banks, drugmakers drag Europe stocks 0.9 pct lower

Published 06/25/2009, 12:49 PM
Updated 06/25/2009, 12:56 PM
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* FTSEurofirst 300 index closes down 0.9 percent

* Banks, drugmakers fall

* Porsche gains

By Joanne Frearson

LONDON, June 25 (Reuters) - European shares closed lower on Thursday as banks and drugmakers fell and investor sentiment was hit by data showing the number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week.

The pan-European FTSEurofirst 300 index of top shares closed down 0.9 percent at 845.71 points. The index has rebounded around 30 percent since it hit a lifetime low on March 9.

Banks took the most points off the index. Standard Chartered fell 2.3 percent after a trading update from the Asian-focused bank provided no real surprises. HSBC, Credit Suisse and UBS were down between 2.4 and 5.9 percent.

Royal Bank of Scotland bucked the trend, up 3.4 percent, after Cazenove upgraded the stock to "outperform" from "underperform".

"Considering the (jobless) data from the U.S., things are not really developing in line with expectations. The labour market is still not in a great shape which have cooled things to a certain degree down," said Heino Ruland, strategist at Ruland Research.

"Investors are looking for some hard facts that things are really improving. I think we are going to be in shaky markets for the next two or three weeks at least."

Initial claims for state unemployment insurance increased by 15,000 to a greater-than-expected seasonally adjusted 627,000 from a revised 612,000 the week before, the Labor Department said. Analysts polled by Reuters had forecast claims to drop to 600,000 from a previously reported 608,000. However, investors took some solace from the final reading of first-quarter gross domestic product, which contracted less than had been previously expected.

SANOFI-AVENTIS FALLS

Drugmakers were in the doldrums. French drugmaker Sanofi-Aventis slipped 4.6 percent after an analyst note raised concerns over the safety of its blockbuster diabetes drug Lantus. Sanofi officials said the diabetes drug was safe.

On the upside, shares in Porsche rose 7.6 percent on the hopes that the German sports car maker would reach a deal in which the Gulf state of Qatar would take a stake in carmaker Volkswagen, majority-owned by Porsche.

Infineon was 4.6 percent higher after it said it was raising guidance for third-quarter financials.

Investors nerves were also rattled by comments on Wednesday from the U.S. Federal Reserve, which warned that the country's economic weakness would remain for a time and said it would keep interest rates close to zero.

"The equities market had been a one-way bet but now there are doubts about the recovery, given recent forecasts from the World Bank and the OECD (Organization for Economic Cooperation and Development)," said Jeremy Batstone-Carr, strategist at Charles Stanley.

"This is the time of year when analysts revise their earnings for next year. They had earnings growth of 20 percent for 2010, but given the backdrop, that looks unlikely."

Across Europe, the FTSE 100 index was down 0.6 percent, while Germany's DAX and France's CAC 40 were both 0.7 percent lower. (Additional reporting by Harpreet Bhal; editing by Karen Foster)

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