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Oct. 22, 2007, 12:25 p.m. EDT

European Shares Slump on Wall Street Woes

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By Sarah Turner

European shares posted broad losses on Monday on concerns that economic woes are eating into profit growth, with miners such as Vedanta Resources and industrial stocks like Siemens taking the brunt of the fall.

The pan-European Dow Jones Stoxx 600 index dropped 1.3% at 375.82, its biggest one-day fall since Sept. 7, with miners down 4.2% and industrials down close to 2%.

The U.K.'s FTSE 100 index closed down 1.1% at 6,459.30, the German DAX 30 index fell 1.1% at 7,794.94 and the French CAC-40 index lost 1.5% at 5,656.74.

"The European losses are a reflection of what happened in the U.S. on Friday," said Peter Jarvis, director of European equities at F&C Asset Management.

On Friday, Wall Street dropped sharply after industrial firms Caterpillar /zigman2/quotes/203434128/composite CAT -0.85% and Honeywell /zigman2/quotes/205583690/composite HON -2.62% warned that U.S. economic woes would likely erode earnings.

The Dow saw its losses accelerate in afternoon trading before finishing down 366 points, or 2.6%, at 13522. U.S. stock markets started in the red on Monday, but technology stocks helped the Nasdaq index turn higher about an hour into the session.

European investors picked up on the U.S. industrial selling theme, pushing down shares in German engineering conglomerate Siemens by 1.8% and Sweden's SKF /zigman2/quotes/202634743/delayed SE:SKF.B +0.57% by 2.1%.

Swedish appliance maker Electrolux /zigman2/quotes/203332100/delayed SE:ELUX.B +0.05% added to worries about the prospects for performance in the U.S.

The company's shares dropped 8.2% after it said the risk of a further decline in the U.S. appliance market, combined with raw-material cost increases and cost pressures on European margins, has made it more uncertain about the outlook for 2007.

Still, Electrolux stuck to its guidance for operating income to exceed last year's level after reporting a 73.2% rise in nine-month net income to 762 Swedish kronor ($190 million).

Miners are also sensitive to the economic outlook, as this is closely tied to demand for metals. Shares in Vedanta Resources dropped 5%, Kazakhmys /zigman2/quotes/208098927/delayed UK:KAZ 0.00% shed 5.2% and Antofagasta /zigman2/quotes/200173667/delayed UK:ANTO +1.44% declined 4.6%.

Commodity prices also took a knock from the Wall Street selling on Friday, with gold prices slipping back from last week's highs and oil futures falling below $87 a barrel to trade down $1.70 at $86.90.

While European shares dropped Monday, they had been performing better of late.

Since hitting a low point of 348.90 on Aug. 17, the Stoxx 600 index has been moving back towards its all-time high of 400.99, reached on July 13, but progress hasn't always been steady.

F&C's Mr. Jarvis said Monday that he's expecting volatility to continue in the fourth quarter, but with a positive bias. "We still see a slight uptick (for the equity markets) at the year end," he said.

Shares in Pearson /zigman2/quotes/204954587/delayed UK:PSON +0.31% rose 1.4%, outperforming the broader London market, after the media group said it traded strongly through the third quarter.

Pearson, which publishes the Financial Times newspaper and educational texts, said it remains on course to achieve strong underlying growth on its key financial measures. Analysts at Bear Stearns noted that Pearson upgraded guidance for its education businesses.

Shares in Royal Caribbean /zigman2/quotes/208854639/composite RCL -3.28% rose 7.5% in Norway trade after the firm posted a 14% rise in third-quarter net income to $395 million due to stronger late bookings. Rival cruise operator Carnival /zigman2/quotes/210414141/delayed UK:CCL +3.43% saw its shares rise 1.6% in London.

Meanwhile British Energy shares slumped 8.1% after it detailed more problems at its reactors. Four of its reactors are currently shut down, British Energy said, after it found a problem with the wire coating of structures inside several reactors.

In the banking sector, Commerzbank shares lost 2.9% after the bank's chief executive reportedly said the firm isn't in merger talks and reiterated that the bank's provisions to cover its subprime mortgage exposure in the U.S. may not be enough.

Still in Germany, shares in energy metering firm Techem advanced 17% to €57.56 after the company agreed to an offer of €58 a share from Macquarie European Infrastructure Fund II.

Write to Sarah Turner at sarah.turner@dowjones.com

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$ 203.92
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UK : U.K.: London
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Rev. per Employee
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