European blue-chips lose, but autos, techs advance

European blue-chips ended the week on a negative note yesterday, weighed on by weak bank and energy stocks, but investors betting on an economic recovery pushed autos and technology stocks higher.

Reinsurer Swiss Re was a negative influence as its shares fell after its interim result, despite a near six-fold rise in profits.

Data showing a surge in US personal spending and a rapid expansion in Midwest manufacturing provided further fuel for investors seeking signs that conditions in the world's largest economy are improving.

Companies like Dutch consumer electronics firm Philips, cosmetics giant L'Oreal and Europe's largest carmaker, Volks-wagen, are seen benefiting from any upswing in the economic cycle and all rallied on Friday.

"Cyclical stocks are still flavor of the day while investors have faith in this recovery. That's where the growth is, although a lot has been priced in already," one London-based dealer said.

The monthly index of the National Association of Purchasing Management-Chicago came in at 58.9 for August compared with forecasts of 55.5, helping Wall Street reverse early losses.

Optimism

"The US has clearly improved. Many economists are now talking about growth of 5 percent or more for the third quarter," said Deutsche Bank economist Mark Wall.

The FTSE Eurotop 300 index closed down 1.1 percent at 896 points, with stocks to decline outnumbering those to rise by about three to two.

The narrower Euro Stoxx 50 index was 0.7 percent weaker at 2,557 points.

Both indices ended down around 1.5 percent for the week, having edged to this year's highs last week but remained trapped within broad ranges.

"In Euroland, some data has picked up which suggests the economy has bottomed out but we do need stronger evidence. Euroland has everything to prove whereas the US has shown it is on the way," Wall said.

A host of data next week including German unemployment data and the Reuters Eurozone Purchasing Manager's Index may give Europe a chance to prove that it too is on the mend.

At 6:15pm GMT in New York, the Dow Jones Industrial Average was up 0.1 percent at 9,387 while the NASDAQ Composite Index was 0.3 percent firmer at 1,806 points.

Dealings were light in New York as many investors left early for the long weekend, with the US markets shut tomorrow in observance of Labor Day.

Around Europe, Britain's FTSE 100 index ended down 0.9 percent, the Swiss SMI was off 1.5 percent and France's CAC 40 was 0.4 percent weaker.

Germany's DAX was 0.2 percent softer.

Philips was the biggest blue-chip gainer, rising 3.6 percent to a nine-month closing high after the company said it was confident a growing trend of alliances with telecoms firms and consumer branded firms would improve margins.

French peer Thomson rallied 4.3 percent while Germany's Epcos shot up 8.9 percent.

In Britain, pest control-to-washroom services company Rentokil Initial rose 2.7 percent after investment banks raised price targets for the group following its results on Thursday.

Banks, insurers weak

Heavyweight banking stocks were among the biggest decliners, with Societe Generale, ABN Amro and BNP Paribas all down about two percent.

Swiss Re, the world's number two reinsurer, was 3.6 percent weaker despite posting a higher-than-expected first-half net profit on strong non-life premium income growth, shaking off the impact of a weak dollar.

Dealers said investors were switching out of the stock after its outperformance of peer Munich Re by about 10 percent over the past week.

Another insurer, Britian's Royal & Sun Alliance was down 4.0 percent on renewed talk it might unveil a rights issue with next Thursday's half year results. The company declined to comment.