Old faithfuls battered as turbulence persists

European investors had a white-knuckle ride yesterday, but steep morning falls were trimmed in the afternoon.

The worst hit sectors were old economy faithfuls such as mining, distribution, motors and engineering. Financials were also losers, following concern over the health of Japanese banks and news of a significant downgrade from Goldman Sachs of the 2001 forecasts and price targets for three of the big German banks.

Goldman's 2001 earnings downgrades for Deutsche Bank, Dresdner Bank and Commerzbank left estimates about 10 per cent below consensus.

The US investment bank said its review reflected the outlook for the capital markets, industrial holdings gains and fourth quarter results. But Goldman added: "Even on broadly lower forecasts, we would add to most positions."

Deutsche Bank fell 5.1 per cent to €82.60, Dresdner Bank slipped 0.5 per cent to €43.20 and Commerzbank gave up 1.3 per cent to €29.55. HypoVereinsbank, the only one of the big four not to disappoint with fourth quarter earnings, was not immune from the setback. The shares lost 3.1 per cent to €63.20.

Goldman cut its earnings forecasts for Nordic banking group Norde, reflecting its expectation of a tougher equity markets environment across the sector. Nordea lost 2.9 per cent in Stockholm.

French banks were weak on concerns over the Japanese banking situation. Societe Generale lost 5.2 per cent to €63.80, Credit Lyonnais lost 1.2 per cent to €38.55 and BNP Paribas was 2.6 per cent lower at €88.60.

BSCH of Spain was 2 per cent lower at €10.68 and Italy's Banca Intesa BIN gave up 1.9 per cent to €4.22.

Earlier, Tokyo was hit by news that international ratings agency Fitch had placed the individual ratings of 19 Japanese banks under negative review. Rumours also surfaced in Europe that one of Japan's banks was on the verge of collapse.

Car makers remained under pressure, still dented by Tuesday's gloomy west European car sales in February. "The timing of the fall-off in sales came as something of a surprise," said a motor industry analyst. "Sales had been expected to turn down in the second quarter, so the slowdown came about three months early."