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Oil, gas companies drag European bourses lower

European shares traded lower on Friday, dragged down by oil and gas companies' poor performance and concerns over mobile-handset maker Nokia's fourth-quarter revenue.

The pan-European Dow Jones STOXX 600 index dipped 0.3 percent to close at 367.76. Oil companies led decliners as light sweet crude futures stayed below US$56 a barrel in electronic trading.

France's Total saw its shares lose 1.1 percent and the A shares of Royal Dutch Shell traded 1.1 percent lower.

Britain's FTSE 100 index declined 0.2 percent to 6,273.40, the German DAX Xetra 30 index lost 0.4 percent to 6,649.77 and the French CAC-40 index slipped 0.2 percent to 5,561.90.

Despite a weak start, many market observers expect European equity markets to make progress this year.

"We expect reasonable progress in markets this year. Maybe it will be more volatile, but the economic backdrop at the moment is relatively supportive," said David Moss, director of European equities at F&C Asset Management.

Shares of Nokia lost 3.3 percent in Finland as US rival Motorola overnight cut its forecast for fourth-quarter sales and profit, citing a shortfall in its mobile-devices segment. Credit Suisse cut its rating on Nokia to neutral from outperform.

"Given the near-term risk, we are issuing a trading sell," the bank added.

Analysts also see some knock-on effects in the semiconductor and mobile-networks segments from Motorola's warning.

Analysts at ABN Amro said that, while none of the European semiconductor makers are major suppliers to Motorola, they believe the warning is a new sign that demand is coming mostly from low-end and emerging markets.

"Incremental demand for low-end handsets means lower chip content per phone as low-end models are not equipped with Bluetooth, audio, video or a camera," they said.

The analysts said STMicroelectronics, Infineon Technologies ARM Holdings, CSRand Wolfson Microelectronics"are all likely to be marked down" but added that investors should think about buying Infineon on weakness.

Wolfson's shares lost 2.6 percent, while CSR declined 3 percent, ARM Holdings declined 0.6 percent, Infineon traded flat and STMicroelectronics shares rose 0.9 percent.

"Motorola's warning offers enough reasons to shift telecom exposure from the quickly commoditizing handset market to the far more protected and resilient mobile network segment," analysts at Dresdner Kleinwort said.

Shares of Ericsson, a maker of mobile infrastructure as well as phones through its Sony Ericsson joint venture, slipped just 0.4 percent.

Meanwhile, French automaker Renault saw its shares slip 0.7 percent after the company said that last year's sales declined 4 percent to 2.43 million vehicles. The company also said that it's expecting a slight increase in sales this year.

Broker Alstom dropped 4.6 percent in Paris after Citigroup downgraded the company to neutral, noting that Alstom's shares have risen by around 37 percent since November.

David Moss, director of European equities at F&C Asset Management, said pharmaceutical stocks, which performed badly last year, are attracting interest as valuations have come back from historical levels, cash flows are still pretty secure and the companies themselves are large and have lots of liquidity.

Shares of Swiss drug company Roche climbed 1.9 percent, after the company and US biotech partner Genentech said that results from a randomized Phase II study comparing pertuzumab plus gemcitabine to gemcitabine alone in women with fallopian tube cancer were encouraging.

Other pharmaceutical companies, such as AstraZeneca and Novartis, were also trading positively, up more than 1 percent.

Airlines also made gains to close out the trading week.

Air France-KLM and Deutsche Lufthansa were more than 2.7 percent higher, boosted by weaker crude prices.
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