European shares slipped on Wednesday amid caution ahead of U.S. data and with Interbrew a standout loser on concern the price it agreed to take control of Brazil's AmBev may be too hefty. Thinning earnings newsflow shifted investors' attention to the macroeconomy, amid hopes the Federal Reserve's Beige Book on economic conditions later and, crucially, Friday's U.S. non-farm payrolls will add to a picture of economic recovery. By 0957 GMT, the FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was off 0.3 percent at 1,022 points -- a hair below Tuesday's peak of 1,024.52 but still standing about seven percent higher than at the start of the year. Any confirmation that the economy is creating enough jobs to sustain the economic recovery would spur new equity gains and extend a year-long rally, strategists said. "Markets are still on hold waiting for the U.S. payroll data on Friday for the next directional signals on the recovery and the Fed's policy intentions," said Bear Stearns economist David Brown. Indications from Monday's ISM manufacturing index and the latest Challenger layoff survey suggest that employment conditions tightened in February, Brown added. But equity markets are mired in the face of a softening recovery and interest rate hikes that some fear may smother the economic pick-up if they take place too soon.
Comments by U.S. Federal Reserve Chairman Alan Greenspan at an Economic Club of New York luncheon on Tuesday that interest rates, now at a 1958 low of 1.0 percent, must rise eventually rekindled worries over the timing of a monetary tigthening. The narrower DJ Euro Stoxx 50 index <.STOXX50E> shed 0.4 percent to 2,935 points. Around Europe, Frankfurt's DAX <.GDAXI> shed 0.3 percent, while Paris's CAC 40 <.FCHI> fell 0.4 percent, London's FTSE 100 <.FTSE> was 0.6 percent weaker and Zurich's SMI shed 0.1 percent. And U.S. futures signalled fresh losses for Wall Street.
AMBEV DEAL HITS INTERBREW
Investors gave a thumb down to Interbrew's announcement that it would pay 9.2 billion euros ($11.5 billion) to take control of AmBev and create a company worth about $16.5 billion, on fears it may be overpaying. Analysts have criticised Interbrew for overpaying for past acquisitions such as Bass in the United Kingdom and failing to make expected savings from merging operations. "The transaction will be earnings enhancing for Interbrew in 2007, i.e. dilutive until then," said analyst Anthony Geard at Investec Securities, also adding that the company's forecasts for 280 million euros of savings and synergies was considerably ahead of Investec's expectations. British American Tobacco was another decliner, off four percent as shares went ex-dividend. Accor rose 3.5-percent as the hotelier posted a smaller-than-feared drop in 2003 earnings and said it saw signs of recovery in the key U.S. and British markets. There was good news for Smith & Nephew , the UK medical devices firm recently the subject of bid speculation, as Goldman Sachs raised its price target by 26 percent to 580 pence a share from 460 pence and kept an "outperform" rating on the stock. Its shares gained three percent to 537.9 pence.
Elsewhere, the pharmaceutical sector was a mixed picture as Ireland's Elan surged 11 percent on news by partner Biogen Idec that their highly anticipated multiple sclerosis drug Antegren could be launched as soon as 2005. But copycat threats plagued French peer Sanofi-Synthelabo after the emergence of two new alternatives to its blockbuster sleep drug Ambien, and increased patent risk on its top-selling blood thinner Plavix by generic drug firm Apotex.//