Markets & Finance

European Indexes Lower


Major indexes cooled Wednesday after beginning the year on a high note

From Standard & Poor's European MarketScope

Wall Street looked set to open in the black ahead of ISM manufacturing gauge, ADP employment data, Fed meeting minutes and December auto sales data. Crude trades below US$61/barrel. Gold falls on profit-taking after hitting a 4-week high on the back of a weak US$.

After Tuesday's gains, the CAC 40 index (-0.12%) struggled at mid-session. At home, Arcelor-Mittal (-2.59%) tumbled as Credit Suisse downgraded the steel sector to underweight from market weight in its sector outlook report. The broker argued that steel markets are getting tough in the US and problems look likely in Europe.

The French government says it still 'strongly' backs the Suez (SZE) (-0.65%) - GDF (+0.32%) merger. Elsewhere, former employees fear attempts by Vivendi (V) (-0.13%) to reduce its €770 million pension deficit may result in the loss of a key pension perk. Dassault is to quit the shareholder pact in Thales (-0.31%) after it completed its satellites merger with Alcatel Lucent (ALU) (+1.16%), but will keep most of its shares for now, regulator AMF reportedly said.

Areva's (-0.70%) Jeumont unit sold its electromechanical unit to Altawest. No financial details were disclosed. On the broker front, Exane and Dresdner upgraded PSA (+1.56%) and PPR (+0.44%) to outperform and buy respectively. Citigroup downgraded Publicis (-0.47%) to hold from buy.

UK: The FTSE 100 index traded flat at mid-session as miners continued to weigh after yesterday's good run. Xstrata (-5.02%), Antofagasta (-6.01%), Vedanta (-5.37%) and Rio Tinto (RTP) (-3.19%) melted. In broker news, a bullish UBS banking sector note helped Barclays (BCS) (+0.47) and Royal Bank of Scotland (+0.69%).

Autonomy (-0.10%) fell on a Numis downgrade while Trinity Mirror (-0.11%) bore the brunt of a rating cut from Panmure Gordon. In corporate news, bluetooth specialist CSR (-3.64%) fell after being named in a patent infringement case and a rival firm secured funds to make semiconductors from plastic.

BSkyB (+0.19%) is to offer video on demand, the FT wrote. In trading updates: CRH (-1.24%) expects fiscal year pretax profit to rise over 23%. Majestic Wine (+0.35%) says Christmas sales rose 4.4%.

Germany: The Xetra-Dax index (-0.07%) remained a touch below breakeven at mid-session Wednesday after Tuesday's solid gains. More than €5trn worth of securities were traded on German stock exchanges last year, up from €3.8trn the year before, Deutsche Boerse (+0.3%) said, adding that its Eurex unit had a record turnover of 1.53 billion contracts, up from 1.25 billion in 2005.

In other news, Commerzbank (+0.71%) will participate in the bidding process for Landesbank Berlin, if it makes strategic and operational sense, CEO Mueller said. Metro (-2.02%) was lower after rumor-based marked gains, with commentators saying they do not expect the retailing giant to go private. Broader market-listed Grenke Leasing (+9.06%) surprised on the positive side as it reported solid new business growth last year, namely +9.8% to €460 million.

Loewe (+7.08%) expects its operating margin to increase to at least 6-7% in the next three years, its CEO, Rainer Hecker, told Boersen-Zeitung. Key on the broker front, UBS lifted its target on Bilfinger (+1.59%) to €68.50, reiterating its buy rating. Credit Suisse downgraded the steel sector to underweight from market weight, saying steel markets are getting tough in the US and problems look likely to arise in Europe. ThyssenKrupp (-2.23%) and Salzgitter (-2.21%) took a knock.

Elsewhere: The SMI index (+1.28%) was firmly higher on its first day of trading of 2007 after other European markets clocked up solid gains Tuesday.

Spanish shares slipped lower at midday with steel shares falling after a downgrade on the sector from Credit Suisse: Acerinox (-3.38%), Arcelor-Mittal (-2.65%).

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