(by G. Andersen)

European stock markets fell in early trade on Tuesday after disappointing earnings guidance from 3M in the US left blue chip stocks on Wall Street weaker overnight, while caution prevailed ahead of congressional testimony from Alan Greenspan.

In early exchanges, the FTSE Eurotop 300 was down 0.3 per cent to 963.12, while the Xetra Dax in Frankfurt shed 0.3 per cent to 3,801.78. In Paris, the CAC-40 was 0.3 per cent lower at 3,583.1 and London’s FTSE 100 lost 0.1 per cent to 4,315.4.

Mr Greenspan, the chairman of the Federal Reserve, presents his semi-annual testimony on monetary policy, and is expected to say that recent signs of economic slowdown is only temporary and interest rates will need to rise gradually.

Shares of Infineon rose after the company reported lower-than-expected operating income and a net loss for its third-quarter following increased charges related to anti-trust investigations.

The company said sales were 30 per cent higher than the same quarter a year ago however, and that it expected growth in revenue and earnings in the fourth quarter. Investors were encouraged by this and the stock rose 1.4 per cent to €9.43.

But it was weakness in the insurance sector that dragged on the markets after Converium, the Swiss reinsurer, said it expected to report steep losses in the second quarter and may need to consider a capital increase.

Swiss Re was worst hit in early trade, down 4.1 per cent to SFr70.75, while Hannover Re fell 2.9 per cent to €24.91. Munich Re shed 1.5 per cent to €79. In the wider insurance sector, Zurich Financial slid 2.6 per cent to SFr178, Allianz was off 1.3 per cent to €79.96 and Aviva was 1 per cent lower at 524p.

Novartis, the Swiss drugs manufacturer, was up 2.4 per cent to SFr54.55 after it said its first-half net income beat expectations, rising 19 per cent to $2.8bn thanks to margin improvements on a 17 per cent rise in sales.

The sector responded positively, and GlaxoSmithKline added 1.6 per cent to £10.59, AstraZeneca gained 1.3 per cent to £23.11, while Sanofi-Synthelabo climbed 0.3 per cent to €53.40.

Fiat, the Italian carmaker, fell 3.6 per cent to €6.35 as investors fretted the group’s targets would be downwardly revised after La Repubblica newspaper reported the company’s chief executive was concerned that his predecessor’s forecasts had been overly optimistic.