European stocks pare sharp losses

European equity markets recovered from the worst of their early losses after after the major US indices opened higher.

By mid afternoon in London, the FTSE Eurofirst 300 was down 0.5 per cent at 1,388.97. At its worst level of the session, the pan-European benchmark had been down 1.7 per cent at 1,372.15.

Frankfurt's Xetra Dax fell 0.7 per cent to 7,516.91, the CAC 40 in Paris was flat at 5,250.95 and London's FTSE 100 was down 0.7 per cent at 5,984.2.

The recovery came in response to Wall Street's higher open, bouncing from Tuesday's sharp losses. JPMorgan, the New York bank rallied 4.6 per cent as it showed itself to be something of a rarity in the sector with its limited exposure to credit market losses.

ASML (NASDAQ:ASML), the Dutch maker of memory chip manufacturing equipment, failed to be saved by its surprise rise in fourth-quarter profit, shedding 8.9 per cent to EU16.83 - the Eurofirst's biggest percentage loser.

Chip stocks were weaker across the board after Intel (NASDAQ:INTC) of the US warned after the Wall Street close on Tuesday that first-quarter revenue would be lower than analysts' estimates.

Infineon (NYSE:IFX), the German chipmaker, fell 3.7 per cent to EU6.44, while Franco-Italian group STMicroelectronics (NYSE:STM) lost 0.4 per cent to EU8.22.

Other high-growth stocks, particularly the alternative energy sector, fell as investors shied away from risk and favoured defensive drugs stocks.

Q-Cells, the German solar panel maker, fell 7.5 per cent to EU72.26 as Société Générale downgraded the stock to "sell" from "buy" and cut its target price to EU66 from EU98.

SocGen also cut its rating on rival SolarWorld to "sell" from "hold" and lowered its price target to EU29 from EU45. SolarWorld shares fell 7.2 per cent to EU32.62.

Analyst Didier Laurens said the stocks were currently overvalued, having been among the best performers over 2007. He added that there was also risk over a silicon shortage.

Norwegian solar panel maker Renewable Energy fell 4.2 per cent to NKr199.50, while Danish wind turbine producer Vestas Wind Systems shed 3.9 per cent to DKr440.50.

Dwindling opportunities for takeovers of Portuguese bank Millennium BCP following the appointment of a new chief executive were highlighted by brokers at UBS.

"The arrival (of new CEO Carlos Santos Ferreira) makes it unlikely BCP chooses to sell out anytime, removing the speculative element from BCP's stock," UBS said in a note.

Shares in BCP were down 6 per cent to EU2.50.