March 15 (Bloomberg) -- European stocks fell, led by insurers and carmakers, after a videotape purportedly from al- Qaeda claimed responsibility for Thursday's bombings in Madrid and said more attacks are planned.

Spain's IBEX 35 Index led drops in the 17 Western European benchmarks with its steepest slide in a year after the opposition Socialist Party won national elections and police arrested three Moroccans and two Indians in connection with the attacks, which had been blamed on Basque separatist group ETA. Santander Central Hispano SA, Telefonica SA and Endesa SA declined.

``It's the revelation that al-Qaeda was behind the attacks in Spain that's causing the declines today,'' said Michael O'Sullivan, an equity strategist at State Street Global in London, which manages about $1.1 trillion. ``People were somehow expecting it to be a problem specific to Spain, but it's not. Other attacks could follow.''

The Dow Jones Stoxx 50 Index shed 0.5 percent to 2682 as of 2:26 p.m. in London. The Stoxx 600 lost 0.8 percent, with five stocks falling for every one that rose. The Euro Stoxx 50, a measure for the 12 countries sharing the euro, slid 1.1 percent.

The benchmarks have lost more than 3.1 percent in three days as concerns about terror attacks on Europe eroded optimism about economic growth that sent them at least 40 percent higher in the year ended Friday. Greek police today found a bomb outside a branch of Citibank in Athens, following a tip-off to a newspaper, Reuters cited the police as saying. Pakistani police found explosives near a U.S. consulate.

IBEX Slumps

The IBEX slumped 2.9 percent, its biggest decline since March 24, 2003. It's lost 5.9 percent in three days, the steepest slide since September 2002. The Spanish government on Sunday said it received the videotape after a television station was tipped off by a man with an Arab accent. Interior Minister Angel Acebes said authorities aren't sure the tape is authentic.

Germany's DAX Index slid 1.1 percent. France's CAC 40 Index dropped 0.9 percent. The U.K.'s FTSE 100 Index lost 0.3 percent. March futures on the Euro Stoxx 50 shed 0.8 percent.

Spain's Popular Party, under the leadership of Jose Maria Aznar, backed the U.S. war in Iraq, a conflict opposed by as many as 90 percent of Spaniards. He unexpectedly lost power in Sunday's elections to the Socialist Party, or PSOE.

Santander, the country's largest bank, shed 2.5 percent to 8.61 euros. Banco Bilbao Vizcaya Argentaria SA, the second- largest, lost 2.7 percent to 10.47 euros. Telefonica, Spain's biggest telephone company, lost 3.6 percent to 12.15 euros.

Endesa Drops

Endesa, the nation's largest power company, fell the most in almost a year as the PSOE victory prompted Merrill Lynch & Co. to cut its rating on the stock.

``We do not expect the PSOE to provide a positive environment for Spain's companies biased toward coal-fired production,'' Paul Rogers, a Merrill Lynch analyst in London, said in a note to investors. He downgraded Endesa to ``neutral'' from ``buy.'' Endesa gets one-third of its power from coal.

UBS AG, Europe's largest bank by assets, recommended investors trim global equity holdings and own more cash, saying a weak job market in the U.S. poses a risk to the pace of growth in the world's largest economy.

It cut the recommended weighting for European stocks to 9 percent of its portfolio from 9.7 percent, for U.S. stocks to 27.3 percent from 28.3 percent and for emerging markets to 5.2 percent from 7.2 percent.

Insurers, Carmakers Decline

Insurers fell as stock-market declines eroded the value of their equity investments. Allianz AG, Europe's No. 1 insurer, declined 2.9 percent to 92.03. Axa SA, the second-biggest, lost 2.3 percent to 17.05 euros.

The dollar slipped to $1.2247 a euro in London from $1.2210 late Friday in New York on concerns the U.S. may be target of another attack. The U.S. is destination for about a fifth of Europe's exports, and European corporate profits drop by 3 percent to 4 percent for every 10 percent slide in the dollar, according to Deutsche Bank AG.

DaimlerChrysler AG, the world's largest maker of luxury cars, shed 1.4 percent to 34.1 euros. It makes more than half of sales in the U.S. Bayerische Motoren Werke AG, the No. 2, slipped 0.6 percent to 33.96 euros. North America is the source of a third of sales. Volkswagen AG, which got 16 percent of revenue from North America last year, dropped 0.4 percent to 36.4 euros.

Thomson SA, the biggest seller of television sets in the U.S., declined 3.3 percent to 14.66 euros.

Adidas-Salomon AG, the second-largest maker of sporting goods, rose 2 percent to 92.39 euros. Credit Suisse First Boston boosted its share-price forecast by 23 percent to 133.80 euros, saying the dollar's drop should bolster profits as Adidas produces in dollar-denominated regions.

Travel and Leisure

Travel and leisure companies declined on concern terrorism fears may damp demand for travel. British Airways Plc, Europe's largest airline, lost 4.7 percent to 275 pence. Iberia Lineas Aereas de Espana SA, Spain's national airline, shed 4.7 percent to 2.43 euros.

The eight-member Bloomberg Europe Airlines Index lost 1.8 percent, extending last week's 9.1 percent drop.

Amadeus Global Travel Distribution SA, the world's largest travel reservation company, slid 4.1 percent to 4.47 euros. TUI AG, Europe's biggest travel company, shed 1.9 percent to 17.6 euros. Hilton Group Plc, the operator of Hilton hotels outside North America, decreased 1.2 percent to 217.75 pence.

Altana AG, Germany's fifth-biggest drugmaker, climbed 4.7 percent to 53.9 euros. The company said Friday after the close of trading that its Daxas treatment kept smokers' lungs from worsening in a study. Analysts at Goldman, Sachs & Co. raised their recommendation to ``outperform'' from ``in-line.''

Volvo Restates

Volvo AB, Europe's largest truckmaker, shed 2.1 percent to 237 Swedish kronor. The company restated fourth-quarter earnings to give a loss instead of a profit after deciding to spin off its stake in rival Scania AB to comply with a European Commission directive. Scania shares shed 0.4 percent to 223.5 kronor.

SIG Holding AG dropped 3.4 percent to 185.5 Swiss francs. The world's second-largest maker of drink cartons yesterday said Chief Executive Officer Roman Boutellier resigned, without giving a reason. Rolf-Dieter Rademacher, head of the company's Combibloc drink carton business, will replace him. It also said Ulf Berg, head of the SIG Beverages AG unit, is leaving to become chief executive of Sulzer AG.

ST, Infineon Decline

STMicroelectronics NV, Europe's largest semiconductor maker, slipped 2.3 percent to 19.35 euros. The company plans to name executive Carlo Bozotti as chief executive officer starting in 2005 to replace Pasquale Pistorio, who has been CEO since ST was founded in 1987 and will retire.

Infineon Technologies AG, the Munich-based No. 2, fell 2.4 percent to 10.98 euros. German semiconductor sales fell ``slightly'' in February compared with a month earlier as the weaker dollar hurt demand and companies switched production abroad, the ZVEI industry group said..

UniCredito Italiano SpA, Italy's second-biggest bank by assets, shed 3 percent to 4.14 euros. The lender said Friday after the close of trading that fourth-quarter profit climbed 8 percent to 380 million euros. The company was expected to report 388 million euros in the period, according to the median forecast of five analysts surveyed by Bloomberg News.

Allianz AG (ALV GR)
Altana AG (ALT GR)
Amadeus Global Travel Distribution SA (AMS SM)
Axa SA (CS FP)
Banco Bilbao Vizcaya Argentaria SA (BBVA SM)
BASF AG (BAS GR)
Bayerische Motoren Werke AG (BMW GR)
British Airways Plc (BAY LN)
DaimlerChrysler AG (DCX FR)
Endesa SA (ELE SM)
Hilton Group Plc (HG/ LN)
Iberia Lineas Aereas de Espana SA (IBLA SM)
Infineon Technologies AG (IFX GY)
Santander Central Hispano SA  (SAN SM)
Scania AB (SCVA SS)
SIG Holding AG (SIGN SW)
STMicroelectronics NV (STM FP)
Telefonica SA (TEF SM)
Thomson SA (TMS FP)
TUI AG (TUI GR)
UniCredito Italiano SpA (UC IM)
Volkswagen AG (VOW GR)
Volvo AB (VOLVB SS)

To contact the reporter on this story: Albertina Torsoli in Milan at atorsoli@bloomberg.net.

Last Updated: March 15, 2004 09:30 EST