Markets & Finance

European Indexes Drop

Sub-Prime turmoil continued to rock world markets Wednesday morning

From Standard & Poor's European MarketScope

US sub-prime woes and weaker retail sales data in the US weighed on European indexes Wednesday morning, but Wall Street opened higher. Oil went down to US$57.95 a barrel. In Asia, markets closed sharply lower.

The FTSE 100 index slipped further at mid-session. Financials were the worst hit, along with mining stocks. In company news, insurer L&G (-4.23%) posted a forecast-beating 13% rise in fiscal EEV operating profit. Home Retail (+3.73%) expects fiscal profit to be ahead of analyst expectations, helped by Argos. It added that current like-for-like sales at Argos and Homebase rose.

Engineering and project management firm Amec (-1.85%) reported a fall in fiscal pretax profit before exceptionals, due to losses in its construction sector. In other company news, Glaxo (GSK) (-0.14%) has won FDA approval for Tykerb. Cadbury Schweppes' (-1.50%) board is planning a £12.6 billion break-up of the company that is likely to involve the sale of its £6.5 billion drinks business, according to The Times.

A CVC-led consortium reportedly said it has not talked about the bid price with Sainsbury (+1.34%). Kingfisher (+3.90%) gained on private equity talk. In broker action: Next (+2.77%) gained on a bullish Deutsche Bank note and target upgrade.

France: The CAC 40 index (-1.83%) continued to trade steeply lower at mid-session. At home, BNP Paribas (-3.19%), SocGen (-3.4%) and AXA (AXA) (-3.6%) wiped off 33 index points. Arcelor Mittal (-3.14%) was leading the race to acquire Japan's Mitsui's 51% stake in Indian iron ore exporter Sesa Goa, The Hindustan Times reported. Arcelor Mittal also lost an appeal against a Brazilian security regulator's ruling that may force it to pay US$5.24 billion to buy stock in its Brazilian unit that it doesn't already own.

Carrefour (+2.66%) was the only blue chip stock in the black. The Halley family has asked two investment banks to help sell its 13% stake, reported, citing unidentified bankers. Morgan Stanley upgraded the company to overweight from equal weight. Air Liquide (-0.93%) won its largest long-term contract in China with Shagang.

SEB's (-0.79%) planned takeover of Zhejiang Supor Cookware passed anti-monopoly review by China's Ministry of Commerce, the China Business News said. Among those reporting, Iliad (-5.9%) disclosed net profit of €123.9 million, up 79.9%. JC Decaux (-1.79%) reported a 4.1% rise in 2006 net income to €201.1 million.

Germany: The Xetra-Dax index (-1.77%) remained firmly below breakeven at mid-session Wednesday. Banks on both sides of the Atlantic are under pressure: Deutsche (-4.12%), Commerzbank (-3.56%). On the local earnings front, Hypo Real Estate (-2.99%) expects a jump in profit this year by another fifth after disclosing a record increase of almost 30% in net profit to €429 million last year. Hanover Re (-3.21%) reported a 2006 net profit of €514.4 million, a touch above expectations. It proposed a dividend payment of €1.60 per share after no pay-out the previous year.

Thiel Logistik (-0.68%) reported turnover of €1.89 billion for 2006, up 2.8% year-over-year. It expects further sales growth for 2007, and confirmed its medium-term margin target of 3%. BMW (-2.34%) saw 2007 group pretax profit rising, and reckoned that additional burdens from external factors will decline this year. Douglas (-0.34%) said sales in the October to February period rose 12.1% to €1.4 billion.

In M&A news, private equity groups Blackstone with Centerbridge Partners and Cerberus Capital Management as well as Canadian auto parts group Magna International have emerged as frontrunners to buy DCX's (DCX) (-1.05%) Chrysler unit. Salzgitter's (-1.08%) takeover talks with Algoma Steel have ended, with the Canadian group saying other parties have also expressed an interest.

Elsewhere: The Nordic bourses were the worst performers in Europe in mid-morning trade as all major European indices moved in the red.

In Zurich the SMI remained about 2% lower.

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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