European Stocks Decline on technology and retailer issues (03-01-2008)

LONDON (MarketWatch) -- Stocks in Europe reversed earlier gains on Thursday, as British retailers Next and DSG International lost ground after their Christmas performance updates and as technology shares declined for a second consecutive session because of worries about economic growth.

The pan-European Dow Jones Stoxx 600, added to the 1.3% drop to start the year, by losing 0.7% to 357.51 after early-morning gains.

Some investors were switching into safer energy oriented issues and shares of German utility E.On rose 2.4% to reach a record high, and French oil exploration giant Total added 1.3% as oil hit $100 a barrel for the first time on Wednesday. Oil prices hadn't reached the century mark during European trade on Wednesday.

But tech stocks like Ericsson, which shed 2.4%, led the broader markets lower on concerns for flagging economic growth.

Among main markets, the U.K. FTSE 100 slipped 0.2% to 6,402.70, the German DAX 30 fell 0.5% to 7,905.70 and the French CAC 40 declined 0.5% to 5,523.73. The Swiss SMI, in its first day of trading since an extended new year's break, fell 1.8% to 8,334.40.

Taking the brunt of falling stocks, the retail sector was under assault after cautious outlooks from two British components.

Shares of DSG International, the electronics retailer that operates the Currys chain of stores, dropped 22%. It anticipates that pretax profit for the year will be 40 million pounds ($79.8 million) to 50 million pounds below market expectations after "disappointing" sales before Christmas.

In the 11 weeks to Dec. 29, same-store sales fell 1% and margins fell due to greater discounting.

At clothing retailer Next, annual profit should "slightly" top forecasts due to tight cost controls. But Next shares fell 6% after the company said it's "extremely cautious" about 2008 as customer finances are likely to become more stretched. It isn't forecasting a return to same-store sales growth in 2008.

The news dented shares of other retailers. Kesa Electricals, the owner of the French Darty chain and the British Comet chain of electronics stores, tumbled 8.5%.

Hennes & Mauritz, the Swedish clothing retailer with stores throughout Europe and the U.K., saw its shares slip 2.5%.

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