European stocks dropped for a second day on concern about terrorism after a letter purportedly from al- Qaeda said the group carried out yesterday's bomb attacks in Madrid. Travel-related companies including British Airways Plc and TUI AG and insurers such as Axa SA and Munich Re declined. ``The attacks have torn us out of the happy world scenario of the past year,'' said Ralph Lau, who oversees about $16 billion as head of equities at Helaba Invest in Frankfurt. ``If al-Qaeda is behind the bombs, it would significantly slow growth in Europe, crimping company profits and hurting stocks.''
The Dow Jones Stoxx 50 Index slid 1.3 percent to 2657.29 at 8:57 a.m. in London. The Stoxx 600 lost 1.3 percent. The Euro Stoxx 50, a measure for the 12 countries using the euro, fell 1.5 percent. All three benchmarks yesterday had their biggest declines in almost 10 months. European benchmarks had jumped in a rally that turns one year old today, rebounding from their lowest levels in more than six years, on expectations an expanding economy would lift corporate earnings. The Stoxx 50 had surged 41 percent and the Stoxx 600 advanced 46 percent in the period, paced by technology companies, insurers and media stocks, The letter was sent to Al-Quds Al-Arabi, an Arabic daily newspaper in London, which faxed it to Bloomberg News. It said the terrorist organization was behind the assaults that killed at least 198 people, and warned the group will attack the U.S. It also named the U.K., Japan and Italy as possible targets. The statement hasn't been verified as an al-Qaeda message.
2004 Gain Erased
The Stoxx 50, which erased its gains for the year today, has dropped 4.7 percent this week. The Stoxx 600 shed 4.9 percent in the period and the Euro Stoxx 50 slumped 5.4 percent. March futures on the Euro Stoxx 50 dropped 2 percent to 2788. British Airways, Europe's biggest airline, lost 3.5 percent to 274.5 pence, extending yesterday's 7.9 percent slide. KLM Royal Dutch Airlines NV, the region's fourth-largest carrier, fell 5.6 percent to 15.77 euros. TUI, Europe's No. 1 travel company, slid 3.5percent to 17.42 euros. ``You're going to have problems with tourism, leisure and airline stocks,'' said Calvin Vaudin, who helps manage the equivalent of $1.3 billion at Ashburton Ltd. in Jersey, U.K. ``Markets are going to remain nervous. Negative sentiment may change when people start saying things are getting oversold.'' Axa, Europe's second-biggest insurance company, shed 2.9 percent to 16.97 euros. Aviva Plc, the U.K.'s No. 2 insurer by premiums, dropped 1.4 percent to 534.5 pence. Munich Re, the world's largest reinsurer, declined 1.6 percent to 90.15 euros.
Novartis Studying Merger
Novartis AG, Switzerland's biggest drugmaker, dropped 2.8 percent to 52.8 Swiss francs. The company said it's considering combining with Aventis, France's biggest drug company, which is trying to fend off a hostile takeover from Sanofi-Synthelabo SA, a smaller French drugmaker. Novartis hasn't decided whether to pursue the transaction, it said in response to a request from the French market regulator. Aventis lost 0.2 percent to 62.3 euros and Sanofi slipped 0.7 percent to 54.8 euros. Aegon NV, Europe's third-largest insurer, said fourth- quarter net income climbed 32 percent to 470 million euros ($577 million). That's more than the 439 million-euro profit predicted in a median forecast of 11 analysts surveyed by Bloomberg News. The insurer expects higher volatility in net income this year and declined to give a profit forecast. The shares slipped less than 0.1 percent to 11.07 euros. Kudelski SA, the world's largest maker of security cards for televisions, rose 2.6 percent to 43.4 Swiss francs. The company said profit more than tripled last year after it won new customers and acquired a business from Thomson SA. Net income jumped to 33.2 million Swiss francs ($26 million) from 10 million francs in 2002, the company reported. ///www.bloomberg.com