Markets & Finance

European Indexes Close in the Red


M&A rumors provided newsflow Wednesday

From Standard & Poor's European MarketScope

European indexes slipped in afternoon trade. US PPI in December rose more than expected. Wall Street was lower as oil traded near US$51/bl after Saudi Arabia said there was no need for an emergency meeting.

UK: The FTSE 100 index closed in the red after In company updates: SABMiller (+4.36%) retained its top-gainer position on a forecast-beating 10% surge in third quarter beer volumes. At the other end, shares in Europe's largest electrical retailer DSG (-11.97%) tumbled after sales in Italy and France disappointed, offsetting strong figures from the UK and Ireland.

Miner Rio Tinto's (RTP) (unch.) fourth quarter refined copper output fell by over a third. Among other retailers, Home Retail (-0.24%) said it expected fiscal year profits at both Argos and Homebase to be around the top of analyst expectations. Woolworths (+0.75%) said Christmas like-for-like sales fell 4.6%.

In other news, Shire (+0.18%) gained after the US FDA approved its drug Lialda for sale, starting talk that the drug maker could become a takeover target. M&A talk helped Pearson (PSO) (+3.50%) and Compass (+1.97%). A consortium led by Qinetiq (-0.36%) has won the largest chunk of a two-package defense training contract, worth £16 billion, the FT reported.

In broker action: WPP (+0.75%) gained after Credit Suisse upgraded it to outperform. Centrica (+1.55%) reportedly rose on a Merrill Lynch upgrade to buy from neutral.

France: The CAC 40 index (-0.57%) ended the session lower. In Paris, EADS (-2.84%) remained the worst performer as it saw a negative 2006 EBIT impact from Airbus. EDF (-2.04%) reported a level 1 incident at its Gravelines nuclear plant. STM (STM) (-1.61%) also fell after chipmaker Intel (INTC) predicted little recovery in gross margins this year.

On the upside, SEB (+11.94%%) posted better-than-expected fiscal 2006 sales of €2.65 billion, up 7.9%. Remy Cointreau (+4.45%) gained on speculation that the Diageo distribution joint venture with Moet is close to being terminated, traders said, with the result possibly being Diageo bidding for Remy Cointreau.

Rhodia (+5.24%) jumped on market talk that Akzo Nobel would be interested in the French company. Among big caps, Vinci (+0.88%) acquired 75% of the Czech Republic's Prumstav for an undisclosed sum. PSA (+0.28%) will supply diesel engines to Japan's Mitsubishi Motors from the middle of this year.

Germany: The Xetra-Dax index (-0.23%) finished in the red. Intel's German rival Infineon (+1.25%) was looking for a new CFO to replace 60 year-old Peter Fischl, whose contract expires in May 2008, reported Handelsblatt. Deutsche struggled to place 25.2 million Beiersdorf (-1.64%) shares and according to sources had to lower its price to €47.50 from between the €48 and €50 apiece cited previously. Morgan Stanley placed 490k Douglas (+0.02%) shares at €40.35-40.50 per share.

There was talk of Moeller Maersk eyeing TUI's (+2.67%) Hapag-Lloyd business. Continental's (-0.52%) CEO planed to recommend a higher dividend for 2006 as he disclosed that the tire group reached its sales and EBIT targets last year. However, he added that 2007's EBIT margin would be under the previous year's level because of one-off items.

MLP's (+5.85%) fiscal 2006 profit was about €90 million, according to Platow-Brief. Key on the broker front, Morgan Stanley lifted its target on Bayer (BAY) (+1.61%) and BASF (BF) (+0.04%) saw a target hike at UBS.

Elsewhere: The SMI index (+0.35%) closed in the black, though down on intra-day highs.

Spanish shares ended the session in the red as higher-than-expected US PPI data saw markets slip both in Europe and the US.

Rocio Opazo-Aniotz, Claudia Perotti, Michael Sanderson, Emma Stevenson, Mariella Mongio, Pawan Girglani, Guarav Panchal, Julien Manrique, Isabell Witt, Sara Oscarsson, Ben Marino, John West

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