European stocks may decline amid speculation that earnings forecasts don't yet reflect the potential for slower economic growth.
Analysts are forecasting earnings of Dow Jones Stoxx 600 companies will rise by 24 percent for 2003 on average, according to JCF Group, a financial information company. That's higher than the 19 percent increase they predicted six months ago.
"I don't know how analysts can have such positive numbers," said Frederic Naef, head of European equities at Advanced Investment Techniques SA, which oversees 600 million euros (US$607 million). "If you pick up the telephone and call 100 companies, you won't find them being optimistic about their own businesses."
The Stoxx 600 Index dropped 0.3 percent this week.
A 3.8 percent gain on Monday and Tuesday was erased as the European Central Bank and the Bank of England kept interest rates unchanged, disappointing some investors.
European executives became more pessimistic last month as banks, hotels and other service industries barely grew, a survey of 2,000 companies showed Tuesday. Yesterday, a German government report showed the country's industrial production declined twice as much in September as economists forecast.
In the US, the biggest importer of European goods, the Federal Reserve cut borrowing costs half a percentage point on Tuesday. The reduction followed an increase in the jobless rate to 5.7 percent in October, a drop in one measure of consumer confidence to a nine-year low, and declines in industrial production the last two months.
Italy is scheduled to announce third-quarter gross domestic product on Thursday. Europe's fourth-largest economy barely grew in the second quarter as consumer spending stalled and companies scaled back investment. UK unemployment and inflation figures and French industrial production statistics are also due out during the week.
Companies set to report earnings next week include Allianz AG, Europe's biggest insurer; Credit Suisse Group, Switzerland's second-largest bank; and Vodafone Group Plc, the world's largest mobile-phone company by market value.
Analysts surveyed by JCF Group expect this year's earnings for Stoxx 600 members to rise 1.7 percent, down from an average prediction of a 17.5 percent gain six months ago.
"There's quite big room" for companies to fall short of profit forecasts, Naef said. He sold his holding of Nokia Oyj, the biggest cellular phone maker, on Thursday.
Some analysts are taking steps to reduce forecasts now.
Claire Kent, an analyst at Morgan Stanley, cut her recommendation for European luxury-goods stocks on Thursday to "cautious" from "in-line." There "appears to be little chance of a positive surprise" from holiday sales, Kent said. Estimates for next year ``appear just completely unrealistic."
Morgan Stanley lowered ratings on Bulgari SpA, an Italian jeweler, and Hermes International SA, a French maker of luxury apparel.
Royal Numico NV slid 7.2 percent after cutting its earnings forecast on Friday. This year's earnings at the world's largest maker of nutritional supplements may be as much as 17 percent less than predicted in August, Chief Executive Officer Jan Bennink said.
Infineon Technologies AG said yesterday that it doesn't expect a recovery in prices or demand in the next five months.
Shares of Europe's second-biggest semiconductor maker fell 9.4 percent.
Allianz's loss widened to 1.8 billion euros in the third quarter from 46.3 million euros during the year-earlier period, according to the average forecast of 11 analysts surveyed by Bloomberg News.
The projected loss includes 750 million euros set aside to cover asbestos-related claims in the US and 550 million euros for claims arising from August floods throughout eastern Europe, analysts said.
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