Markets & Finance

European Indexes Close Flat to Lower


M&A in the banking sector led the news Monday

From Standard & Poor's European MarketScope

European indexes yawned Monday as Wall Street was flat. The Dow Jones Industrial Average traded near the psychologically important 13,000 mark.

UK: The FTSE 100 index closed just below breakeven, weighed down by weakness in banks and pharma. However, with oil at US$64.77/bbl, energy stocks limited the losses. The pound crept back above US$2, after briefly slipping below the mark. Banks were in focus after Barclays (BCS) (-2.40%) agreed to buy ABN Amro (ABN), valuing the Dutch bank at €36.25/sh. The two banks will sell ABN's LaSalle to Bank of America (BAC) for US$21 billion and Barclays CEO John Varley will continue in the same position in the merged entity. However, analysts are expecting the Royal Bank of Scotland (+0.25%) consortium to put in a higher bid, although the RBS group postponed its meeting with ABN Amro.

Further in M&A news, British Airways (-0.39%) said it has approached a number of private equity companies about making a consortium offer for Iberia. Investors cheered Scottish & Newcastle (+2.71%), which was the top gainer on the Footsie all day, on an FT report that Diageo (+0.38%) and SABMiller (-0.09%) have held talks with a view to breaking up the company.

In updates: AstraZeneca (AZN) (-4.03%) posted a just-above-forecast 11% rise in first quarter pretax profit, saying it will be dropping development of AtheroGenics' heart drug. The drugmaker said it would buy US biotech firm MedImmune for US$15.2 billion, which analysts felt is a high price.

France: The CAC 40 index (-0.36%) closed in the red as Wall Street continued to trade flat. SocGen (-3.04%) weighed heaviest, by some 11.3 index points: it denied being in talks with Italy's Unicredit after the close on Friday. However, the two banks may announce a merger after a new French president is elected on May 6, Il Sole 24 Ore reported. Separately, the FT wrote that Unicredit has admitted to conducting talks with SocGen.

Arcelor Mittal (-0.57%) has acquired Mexico's Sicartsa for US$1.439 billion. PSA (-0.19%) has denied a plan to cut 10,000 jobs in Europe, a rumor reported in Capital Magazine. On the upside, Danone (DA) (+1.09%) gained ahead of first quarter sales tomorrow and on strong results posted by Nestle. Cheuvreux forecasted strong full sales of €3.7 billion, up 4.1% year-over-year.

Carrefour (+0.28%) was being cautious when it suggested that its property portfolio could be worth between €15-€20 billion, the FT reported, citing an interview with CEO Jose Luis Duran. Separately, Carrefour has acquired Brazil's Atacadao for €825 million.

Eiffage (-0.01%) has reportedly rejected Sacyr's all-share offer. Finally, Biomerieux (+1.94%) beat the consensus with first quarter net sales at €255.3 million, down 0.1% year-over-year; +6.8% like-for-like.

Germany: The Xetra-Dax index (-0.09%) continued to trade flat until the close, with Wall Street trading mixed. Deutsche Telekom (DT) (-1.19%) lost 600,000 fixed-line customers in the first quarter of 2007, but said improving sales of high-speed Internet access would help it meet its profit targets.

Representatives of billionaire investor Kirk Kerkorian were reportedly seeking a meeting with a group of Chrysler workers proposing an employee-led buyout of the DCX (DCX) (-1.2%) unit to consider some form of cooperation. VW (-0.63%) Chairman Ferdinand Piech will be elected to head the supervisory board of MAN (+0.83%), Focus magazine said, citing an unidentified workers rep. at the truck maker.

On the earnings front, MTU's (+1.04%) first quarter adjusted net income topped expectations. Key on the broker front, JP Morgan upgraded BMW (+2.66%), which closed as one of the leading Dax gainers, to overweight. The broker said two changes marked a turning point in BMW's stock after three years of disappointing performance.

Elsewhere: Italian equity indexes were unable to muster enough momentum to rise off earlier losses, while investors focused on M&A talk and first quarter results.

The Ibex 35 index(-0.62%) ended the session lower with Iberdrola, Telefonica (TEF) and banks the biggest points losers.

Claudia Perotti, Lydia Carroll, Sara Oscarsson, Isabell Witt, Michael Sanderson, Gaurav Panchal, Julien Manrique, John West, Ben Marino, Emma Stevenson, Pawan Girglani.

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