European shares fell on Tuesday, weighed down by a sharp slide on Wall Street, with Swiss reinsurer Converium set to tumble on news it needs more cash than expected to plug a hole in its reserves. Converium said it will issue shares worth $420 million in a share issue to shore up its reserves in a move it unexpectedly announced in July. The company's stock, which had not yet opened in Zurich, slid 11 percent to 25.50 Swiss francs pre-market via agency broker Instinet. Meanwhile, German chemical and drug firm Bayer reported second quarter profit that beat average forecasts, and the group also reiterated its outlook for the full year. But the news was not enough to stop the stock falling 0.8 percent to 21.3 euros. Technology groups were also jittery after U.S. peers tumbled on Monday amid concern over what global chip leader Intel may say in its mid-quarter update later this week.
Among the European chip-related shares, Dutch ASML fell 1.1 percent to 10.7 euros, while Germany's Infineon shed 1.6 percent to 8.2 euros. By 0709 GMT, the FTSE Eurotop 300 index <.FTEU3> was off 0.3 percent at 976 points. The pan-European benchmark also eased on Monday but remains over 4 percent above the new 2004 low it hit two weeks ago. The DJ Euro Stoxx 50 index <.STOXX50E> dropped 0.2 percent to 2,690 points.
DECOUPLING?
Despite the market's struggle to make headway, some analysts remained bullish that European shares will outperform their peers in the United States. "We think Europe should continue to catch up with the U.S. earnings recovery," Morgan Stanley investment bank said in a research note. The bank said a 33 percent valuation discount to U.S. shares, and Europe's lesser sensitivity to high oil prices should also help the region outperform. On an upbeat note, shares in National Grid Transco rose 2.8 percent to 478 pence after the UK utility sold four gas networks for 5.8 billion pounds ($10.4 billion) and said it would return 2 billion pounds to investors. Also on a supportive note, U.S. crude oil prices fell 2 percent on Monday as producer group OPEC looked to raise output, and prices and were expected to ease further in anticipation of a rise in U.S. crude inventories. U.S. light crude was trading at $42.30 per barrel, about $7 below the record peak at $49.40 stuck on August 20.
WAFER THIN
European shares eased on Monday in wafer-thin volumes as London, Europe's biggest equity market, was shut for a holiday. Analysts said dealings could remain light this week as the final week of the U.S. holiday season continues and investors wait for the week's top economic number, Friday's U.S. payrolls data for August. The Republican Party Convention in New York was also keeping some traders away from the city, with trading volume on Monday the lightest so far this year. The Chicago Purchasing Management index of manufacturing activity in the Mid-West region of the United States is due at 1400 GMT, along with the Consumer Confidence index for August, where an easing from the prior month is forecast. On Monday, the Dow Jones industrial average <.DJI> ended down 0.7 percent at 10,122.52 points, and the tech-laden Nasdaq Composite <.IXIC> finished down 1.37 percent at 1,836.49 points.///