European shares declining on weak earnings reports (MarketWatch) (07-02-2008)

LONDON (MarketWatch) - European shares were declining Thursday affected by weak earnings from BT Group and Infineon Technologies as well as Cisco Networks from across the Atlantic.

The pan-European Dow Jones Stoxx 600 index moved down 0.5% to 318.61 in early trading with technology shares under particular pressure.

The German DAX 30 index slipped 0.4% to 6,820.90, the French CAC-40 index moved down 0.5% at 4,789.97 and the U.K. FTSE 100 index declined 0.5% to 5,843.50.

Bank shares were under pressure as interest rate decisions were awaited from the European Central Bank and the Bank of England, although the lack of negative subprime surprises from Deutsche Bank in its results leant some support.

While recession fears have seen the Federal Reserve downplay inflation worries to slash interest rates, the Bank of England has eased at a cautious pace and the European Central Bank has held its fire. The Bank of England decision is due at 7 a.m. Eastern and the ECB at 7:45 a.m. Eastern.

Investors also were worried that U.S. rate cuts may slow after Philadelphia Federal Reserve President Charles Plosser spoke against overly aggressive rate cuts, with the talk dampening a rebound from the market's largest single-day plunge in nearly a year.

Infineon shares fell 9 percent following Cisco's warning of a rapid slowdown in U.S. and European orders after Wednesday's closing bell. Cisco shares fell by nearly 10 percent from their last close to 14.63 euros in Frankfurt.

Elsewhere in Europe, shares in telecom provider BT Group fell 5.8% after its third-quarter earnings per share dropped 74% and revenue growth of 1% was below analyst forecasts.

BT shares had moved higher on Wednesday, after peer France Telecom reported results.

Also, shares in Anglo-Dutch consumer products giant Unilever inched up 0.4% as its fourth-quarter net income dropped 65% to 721 million euros ($1.06 billion), but still beat analyst estimates. It's lifting its dividend by 7% in both euro and sterling terms, and it's planning a share buyback of at least 1.5 billion euros for 2008.

Shares in Deutsche Bank climbed 1.9% after the financial giant's fourth-quarter net profit comfortably beat forecasts and it didn't disappoint with asset write downs.

Source: MarketWatch