BHP Billiton drops; Groupe Danone advances after sales rise
LONDON (MarketWatch) -- European shares fell on Wednesday, with commodity-sector firms leading decliners as BHP Billiton added to growing evidence that the global economy continues to deteriorate.
The pan-European Dow Jones Stoxx 600 index declined 2.2% to 216.03, giving back some of gains made this week.
Miners including Xstrata , down 9.2%, Kazahhmys , down 9.1% and Vedanta Resources , down 8.5%, all weakened early in the session.
BHP Billiton shares dropped 7.1% after the mining giant cautioned China's economic growth had slowed and that a period of volatility and uncertainty would continue in the short term.
The miner posted production figures that were weaker in a number of key areas but not so significantly out of synch with forecasts as to spark earnings downgrades, analysts said. See full story.
"Evidence continues to mount suggesting that the economic and earnings environment is deteriorating sharply," noted economists at UBS.
Meanwhile, Mervyn King, governor of the Bank of England, said that, shaken by the nation's worst banking crisis since World War I, the U.K. economy has likely entered a recession and faces a "long march" back to stability. See full story.
Both sterling and the euro fell heavily against the dollar amid speculation that central banks will cut interest rates in the light of weakening economic growth, with sterling down 2.5% at $1.6265 and the euro down 1.7% at $1.2833.
The U.K. FTSE 100 index fell 1.9% to 4,150.07, the German DAX 30 index dropped 2.5% to 4,662.77 and the French CAC-40 index slid 2.5% to 3,389.53.
U.S. stocks on Tuesday sank under the weight of missed earnings reports and bleak forecasts, spurring investors to pummel the technology sector the hardest. See Tuesday's U.S. Market Snapshot.
Companies reporting earnings on Wednesday in Europe received a mixed reaction.
Shares in French dairy and soft drinks company Groupe Danone rose 1.2% after it reported an above-forecast 31% rise in third-quarter sales to 3.85 billion euros, bolstered by its baby nutrition activities, and confirmed its full-year financial targets.
Dutch telecoms operator Royal KPN climbed 1.6%.
KPN hasn't seen any impact from the economic downturn on the business, doesn't have any liquidity concerns and has taken precautionary contingency plans to protect KPN's cash flow in case of economic headwinds, chief executive Ad Scheepbouwer said in a statement.
The firm reiterated its outlook for 2008 and said that it will launch a 1 billion euro share buyback program. Third-quarter net profit attributable to shareholders fell 1.7% to 349 million euros, missing analyst forecasts compiled by Dow Jones Newswires.
Shares in Swedish industrial equipment manufacturer Alfa Laval dropped 6.1%.
It reported a 9% rise in third-quarter net profit to 992 million Swedish kronor but said that order intake fell and gave a slightly softer outlook.
Schneider Electric shares fell 4.4% in Paris after the electrical equipment maker said that third-quarter sales rose 4.1% to 4.65 billion euros, missing analyst forecasts.
