Chemicals giants take sector-wide bashing

The main European markets ended the week little changed, in spite of more high-profile profit warnings and another downward lurch for the latest German business confidence survey.

The problems facing the pharmaceuticals and chemicals industries failed to abate as the sector was given a fresh jolt by news from New York that Merck, the world's third-largest drug maker, had issued a profits warning.

In Europe, BASF, which took investors by surprise with a profits warning on Thursday, continued to be punished. The shares fell another 2.1 per cent to #43.09 as Goldman Sachs joined the growing list of investment banks downgrading Europe's largest chemicals concern. Goldman cautioned that the second quarter warning from BASF was only company-specific to a limited degree. "We expect most chemicals businesses to have been impacted by the slowdown in Europe, still-weak US and still-high energy/raw materials cost," the US investment bank said.

Bayer, also hard-hit on Thursday, fell another 2.5 per cent to #42.90 as Deutsche Bank lowered its earnings forecasts for this year and next.

Swiss pharmaceuticals giant Novartis came under renewed pressure after a study in Science magazine found limitations in its breakthrough leukaemia drug Gleevec. The shares lost 3.9 per cent to SFr62.35.

In the technology sector, Dutch chipmaker ASM Lithography staged a powerful rebound after recent losses. The shares closed 9.9 per cent higher at #25.45, with the rise exaggerated by thin volumes.

German chipmaker Infineon steadied after the two miserable sessions which saw the stock sink more than 9 per cent after a profits warning on Wednesday. The stock edged just 0.1 per cent down to #29.66 as the latest downgrade, this time from Commerzbank Securities, scuppered any chance of a rebound.

Telecommunications had another volatile session, sliding to the bottom sector in the FTSE Eurotop 300 index in spite of a resilient performance by a sprinkling of leading stocks.

France Telecom gained 1.3 per cent to #53.75 and Telefonica 0.7 per cent at #14.90. But there were enough heavyweight losses to keep the sector on the floor. Deutsche Telekom shed 1.3 per cent at #24.94 and Sweden's Telia 4.8 per cent at SKr50.