European shares hit renewed lows

Europe's leading shares fell to their lowest level in three months on Monday as fears over the world's economy and the growing threat of a war with Iraq continued to weaken sentiment.

Wall Street was closed for Martin Luther King Day, leaving little news to fuel investor appetite.

"The overall situation doesn't fill one with enthusiasm," said Nicolas Williams, a European fund manager at Singer & Friedlander Asset Management.

Major oil stocks led the falls, as the pan-European FTSE Eurotop index closed down almost 2%.

Positive stories

Oil giant Royal Dutch/Shell was among the biggest fallers, down 3% on news that JP Morgan bank had cut its profit forecasts for the group.

France'sTotalFinaElf also slipped 3% while in London Shell and BP both closed the day 2% lower.

Insurance stocks were also in the doldrums, led by Aegon, Allianz and Axa.

"The October/November rally may have been a little premature," said Mr Williams.

However, he sounded a note of optimism, suggesting that markets would lift in the medium term.

"There are a growing number of positive individual stock stories, which suggests it (the market) will form a base eventually."

Leading European stocks Nokia and L'Oreal are due to report later this week, and will be looked at closely for indications of consumer sentiment.

Telecom news

London's FTSE 100 index of leading shares closed down 1% at 3,778 points while the German Dax index also closed almost 1% lower at 2,893.

In Paris, the blue chip Cac index finished 1.2% down at 3,020.

German chip-maker Infineon led the fallers and sparked concerns across Europe after it issued a cautious outlook for the year ahead.

Infineon reported earnings better than many analysts had feared, but its uncertain projections unnerved the market.

The Franco-Italian chipmaker STMicroelectronics, due to report its earnings on Wednesday, fell 2.5%.

Analysts said investors would look closely at results later in the week from telecommunication groups Motorola, Nortel and Nokia.

"The market could run into a storm if stocks of Nokia mobile phones turn out large on Thursday, we could fall quite a bit," a Paris dealer warned.