European stocks may slide in coming days on concern that economic growth will stall in the second half of the year, hurting corporate profits.
ING Groep NV, Axa SA, ThyssenKrupp AG and Clariant AG are among companies set to report earnings next week. Germany's central bank on Monday is expected by economists to indicate second-quarter growth in Europe's biggest economy stagnated.
"We didn't like the economic situation six months ago, and if anything, it's got worse," said Marc Gemoets, who helps manage SF15 billion (US$10 billion) at Ferrier Lullin & Cie SA.
Ferrier sold stocks including Alstom SA, a French power-plant maker, two months ago and doesn't plan to buy them back until the economy shows signs of accelerating growth.
The Dow Jones Stoxx 50 Index added 0.6 percent to 2,760.36 Friday, for a 0.7 percent drop over the week, trimming its rally since reaching a five-year low on July 24 to 13 percent.
"It's too early to be optimistic," said Martina Honegger, a European equity strategist at Vontobel Asset Management.
"We need some good news on the economy and some positive outlooks from companies" before reducing the higher-than-usual cash levels held by some Vontobel funds.
The outlook for second-half profits is deteriorating, according to Thomson Financial Services, which said analysts reduced their average 2002 profit-growth forecasts for companies in the FTSE All-World Europe Index by 4.1 percent in July from June.
Axa, Europe's second largest insurer, may report Wednesday first-half earnings fell, dragged lower by sliding equity investments.
slip slidding away
The insurer's shares fell 35 percent since June 1, as tumbling equity markets prompt concerns investment losses may cut into reserves the Paris-based company needs to pay claims and write new business. ING Groep NV, the largest Dutch financial-services company, may report a drop in second-quarter profit on Thursday.
Ciba Specialty Chemicals AG, the world's biggest maker of whiteners for detergents, releases results on Wednesday and ThyssenKrupp, Europe's third-largest steelmaker, reports fiscal third quarter earnings on Thursday.
Deutsche Telekom AG, Europe's largest phone company, Nestle SA, the world's biggest foodmaker, and WPP Group Plc, the world's No. 1 advertising company, also publish earnings next week.
"There will be very little profit in 2002 and probably in 2003," said Gemoets. "We are using rallies to exit from some stocks."
The German economy probably expanded by 0.2 percent in the second quarter, the same rate as in the previous three months, an estimate by the Bundesbank is expected to show on Monday, according to economists surveyed by Bloomberg News.
The UK on Friday may revise a growth estimate to say that Europe's second-largest economy probably grew at a slower pace in the second quarter than the 0.9 percent indicated last month, according to economists polled by Bloomberg.
"I don't see economic growth being anything but moderate for the foreseeable future," John Haynes, who helps oversee US$7 billion at Carr Sheppards Crosthwaite Ltd in London, said.
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