A profit warning by German chemicals giant BASF dragged European chemical stocks lower today, sparking fears that traditional defensive shares are not immune to a spreading global economic slowdown.
BASF, Europe's largest chemicals group, plunged over five per cent after it said it no longer expected operating income to increase in the second quarter, departing from an earlier forecast, and announced manufacturing plant closures.
"It is a clear signal from management that times are getting harder and more uncertain and that the environment will remain difficult for a longer period," said Mr Oliver Guenter, an analyst at Bankgesellschaft Berlin.
BASF said it would respond by reducing its capital expenditure programme by a fifth, shutting down 10 sites outright and axing an additional 14 plants at other sites to cut capacity.
BASF's profit warning is the second from a German blue chip firm in as many days. Chipmaker Infineonshocked investors by saying it expected a loss of up to euro 600 million in its current quarter as a result of the slowdown.