Europe bruised by insurers

LONDON, England (CNN) -- European markets ended down on Thursday after the world's biggest reinsurers Munich Re and Swiss Re posted weak results amid slumping equities and mounting claims.

Wall Street was mixed in ealier trading after a report showing U.S. jobless claims rose unexpectedly for the third week in a row. (Full story) That followed another report confirming that the U.S. economy grew at a pace of just 1.1 percent in the second quarter, following a 5 percent jump in the previous three months. (Full story)

Despite the weak start for U.S. markets, European bourses managed to limit their losses.

London's FTSE 100 ended down 1.5 percent to 4,209.3 and the CAC 40 blue chip index in Paris lost 2.6 percent to 3,331.7, while Frankfurt's electronically traded Xetra Dax was down 1.5 percent to 3,626.43 in late trading (the German market was set to close at 1800 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 1.8 percent, led lower by the insurance sub-sector.

Munich Re (MUV2), the world's biggest reinsurer, was down 3.5 percent to 176.84 euros in late Frankfurt trading, after it posted a second-quarter pretax loss of 1.321 billion euros ($1.30 billion) due to additional reserves at its ailing U.S. unit American Re, higher claims from the September 11 World Trade Center attacks and writedowns on its equity investments. (Full story)

Swiss Re, the world's second-largest reinsurer, fell 11.6 percent to 108.50 Swiss francs after the company said it was forced to slash the value of its investment because of tumbling markets in the first-half. (Full Story)

Allianz (FALV), Europe's biggest insurer, was down 3.4 percent to 130.94 euros in late Frankfurt trading after saying flooding in Germany and central Europe could cost it 550 million euros. (Full story)

"Underwriting has not been strong and investment returns have certainly not been great so I struggle to see how returns at insurers are going to grow year-on-year," Jamie Sanderson, European portfolio manager at Edinburgh Fund Managers, told Reuters.

"The consensus forecasts for insurers remain steep for the second half of the year so there is still potential for further disappointment."

Technology stocks were under pressure, led by the chip sector, after Morgan Stanley downgraded its recommendation on the chip sector in Europe to "in line'' from "attractive.''

Dutch chip equipment maker ASML fell 3.3 percent to 10.77 euros -- but off its lows -- after Morgan Stanley cut its price target to 15 euros from 21 euros.

Franco-Italian chipmaker STMicroelectronics (PSTM), Europe's biggest chipmaker, fell 1.4 percent to 20.55 euros despite Morgan Stanley upgrading its stock to "overweight'' from "equal-weight.''

ST's closest European rival, Germany's Infineon (FIFX), was down 3 percent to 11.43 euros in late Frankfurt trading. Philips Electronics, the region's third-biggest chipmaker, lost 6 percent to 20.64 euros.

However, German telecom group MobilCom was up 8.3 percent to 7.04 euros in late trading despite saying on Thursday its financial situation had deteriorated amid an ongoing battle with partner France Telecom and a slumping mobile phone market. (Full story)

France Telecom (PFTE), which has a 28.5 percent stake in MobilCom, fell 4.4 percent to 13.76 euros as speculation grew that it may takeover the group and assume its debt load.

Nokia, the world's biggest mobile phone maker, fell 2.1 percent to 13.50 euros, while Swedish rival Ericsson rose 8.5 percent to 7.05 crowns as investors bought up it stock on the last day of the group's 3.2 billion euros sale of new shares.

Also higher on the day was Marconi (MONI), the beleaguered British telecom equipment maker. Its shares jumped 26.5 percent to 2.15 pence after it agreed to hand control to its lenders, leaving shareholders with virtually nothing. (Full story)

Meanwhile, Ahold -- the world's third biggest food retailer -- lost 5.3 percent to 17.05 euros. Earlier on Thursday, it reported its first net loss in more than a decade after a larger-than-expected 490 million euro charge mostly for its partner in crisis-hit Argentina. (Full story)

Air Liquide (PAI), French industrial gases group, fell 3.5 percent to 136.20 euros after it said first-half net profit slipped 1.3 percent amid a general slowdown in business, but voiced optimism that growth would pick up in the second half of the year. (Full story)

The AEX index in Amsterdam fell 3.1 percent and Milan's MIB30 index lost 2.3 percent, while the SMI in Zurich declined 2.6 percent.

In the U.S. on Thursday, chip stocks declined after brokerage UBS Warbug cut its ratings on the semiconductor sector, while blue chips were hit by a Lehman Bros. earnings downgrade of General Electric. Investors were also hesitate to buy into the markets after two reports pointed to a weak economy. (Full story)

In late morning trading, the Dow Jones industrial average was down 60.34 points to 8,633.33, pulling back from a sharp fall 100 point fall at the open. The Nasdaq composite gained 12.71 to 1,326.95, reversing the morning's losses, and the Standard & Poor's 500 index gave back 5. 39 points to 912.48.