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Europe ends lower
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October 19, 2001: 2:35 p.m. ET
Oil stocks lead declines on bourses as crude prices struggle at two-year lows.
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NEW YORK (CNNmoney) - Worries about economic weakness dragged down European stocks and the euro Friday after Germany's closely watched September Ifo business confidence index registered its sharpest drop in 28 years.
Similar concerns over poor U.S. economic and corporate performance put downward pressure on U.S. equities, but helped boost shorter-dated U.S. Treasuries on hopes the Federal Reserve would have to cut short-term interest rates further to energize the economy.
In London, the FTSE 100 fell 1.9 percent to 5,017.70, and the CAC 40 blue chip index in Paris dropped 1.7 percent to 4,264.89, while Frankfurt's electronically traded Xetra Dax lost 1.4 percent to 4,509.87.
"The reason the (stock) market is struggling is that concerns about the economy and earnings are deepening," said Hugh Johnson, chief investment officer at First Albany Corp. "We don't see anything that says the current profit recession is going to end."
For example, Microsoft Corp. (MDGY: Research, Estimates), the world's No. 1 software maker, posted third-quarter earnings that topped estimates, stripping out a $1.2 billion investment loss, but it warned of a weaker-than-expected personal computer market in December.
European share benchmarks also were in trouble, with a fall in oil shares adding to the gloom. The Eurotop 300 index of pan-European blue chips and Euroland's Euro Stoxx 50 index each lost 1.5 percent.
The euro dipped below 90 U.S. cents to its lowest level against the dollar since Sept. 11 after the Ifo west German business climate index, a key indicator of economic activity, fell to 85.0 from 89.5 in August, under the consensus forecast of 88.1 and at the lowest level since 1993.
The Ifo data provided the first significant assessment of business confidence in Europe's largest economy since the Sept. 11 attacks on New York and Washington and suggested the impact was on a par with that of the first oil shock in 1973.
"It's really bleak news because it comes just at the moment European stock markets are beginning to feel we might have seen the worst of the recession in the States," said David Brown, chief European economist at Bear Stearns.
"This is a basic signal that the euro zone downturn will travel a lot further. The events of Sept. 11 have delivered a huge blow to business confidence and sentiment," Brown said.
The aerospace and defence sector slid more than 2 percent after Rolls-Royce (RR), the world's second-largest maker of aero engines, announced plans to shed 5,000 jobs as airlines delay orders and demand for air travel tumbles by a third.
Rolls-Royce, which supplies engines to Boeing (BA: Research, Estimates) of the U.S. and European rival Airbus, slid 1 percent. EADS (PEAD), which owns 80 percent of Airbus, fell 5.8 percent.
British Airways (BAY), Europe's biggest airline, slid 3.8 percent in London and the second-largest Deutsche Lufthansa (FLHA) dipped 3.6 percent in Frankfurt.
Auto stocks declined after General Motors (GM: Research, Estimates), the world's largest carmaker, warned it expects weaker fourth-quarter earnings due to slumping vehicle sales in the wake of the attacks.
DaimlerChrysler (FDCX), which is expected to post a sharp drop in third-quarter earnings Tuesday as it struggles to return its U.S. Chrysler unit to profitability, fell 2.7 percent.
Volkswagen (VOW), Europe's biggest carmaker, slid 3.6 percent in Frankfurt, while French rivals Renault (PRNO) and Peugeot (PUG) slid more than 2 percent each in Paris.
The technology sector was buoyant as bellwether Nokia (NOK: Research, Estimates), the world's biggest wireless phone maker, posted an 18 percent decline in third-quarter profit.
But the Finnish company's stock rose more than 5 percent after it said fourth-quarter earnings per share would be in the range of  0.18 to 0.20, compared with the previous forecast of 0.25.
Nestle, the world' biggest food company, rose 3.5 percent in Zurich. The company said sales growth slowed in the third quarter amid global economic weakness but still is on track to post higher 2001 sales and profits. 
-- from staff and wire reports
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