Markets & Finance

European Indexes Fall


A roundup of Tuesday's action on major European exchanges

London

The FTSE 100 closed in the the red as a falling Wall Street, credit worries and a high oil price weighed. UK

inflation data was weaker than expected. Crude oil was at US$87.47 a barrel as tension between Turkey and the US and concerns about winter supplies persisted. Energy stocks fired up, but failed to keep the index from going below breakeven. BG (+1.73%) got a further boost on renewed bid talk. In company news, LLOYDS TSB (LLOY.L) (-2.47%) shares slumped after US prosecutors filed civil money laundering charges. Also, NORTHERN ROCK (+3.58%) shrugged off worries of a discounted sale. Among insurers, STANDARD LIFE (+0.45%) said it will offer mainly cash and the rest in shares in a possible bid for RESOLUTION (unch). Costa Coffee owner WHITBREAD (-0.64%) served up a 13.3% rise in first half pretax profit, well ahead of forecasts, adding that second half has started well. In broker action, INTERNATIONAL POWER (+1.83%) gained on a Deutsche Bank price target rise. RANK GROUP (+1.37%) cut earlier losses due to target price and estimate cuts by brokers following the profit warning last week. In the wider market, BURBERRY (-2.55%) said the weak yen will reduce first half reported revenue and profit by around £3 million.

Paris

The CAC 40 (-0.57%) ended in the red but off lows as TOTAL (TOT) added 9.7 index points. Wall Street was trading weaker amid strong oil prices and weak quarterly net orders from home builder D.R. Horton. WTI trades at US$87.35/bbl amid concerns Turkey could invade northern Iraq and OPEC's statement that production by non-OPEC countries is falling. Locally, TOTAL (+1.36%) gained. However, on the downside, ALCATEL LUCENT (ALU) (-4.49%) tumbled as Ericsson issued a profit warning for third quarter. ARCELOR MITTAL (MT) (-2.23%) fell as South Korean steel firm Posco issued below-consensus third quarter numbers and cuts its fiscal op profit forecast. PSA (-0.09%) and RENAULT (+0.16%) were in focus red as September Europe new car registrations fell by 1.5%. The former saw its registrations fall by 3.5% and the latter by 11.3%. Elsewhere, DANONE (+0.67%) sold its 20% stake in Bright Dairy to Shanghai Dairy Group and Shanghai Industrial Holdings for US$124 million. The Spanish energy regulator granted SUEZ (+0.28%) permission to lift its stake in Gas Natural to 11.4%. Still in Spain, Suez agreed to buy Saur's 33% stake in Aguas de Valencia for €135 million. VALEO (-0.35%) sold its cabling unit to Germany's Leoni for €255 million. Finally, SOITEC (SOITxa.PA) (+2.7%) reported consolidated second quarter07/08 sales of €83.5 million, -6.8%.

Frankfurt

Xetra-Dax (-0.09%) closed lower on Tuesday as US equity markets remained weaker despite industrial production rising in line with expectations. Oil traded just off a new record high as tension between Turkey and Iraq and concerns about winter supplies remained key factors in the market. Locally, the ZEW survey came in at a steady -18.1 vs an expected -22.0. On the European corporate news front, Ericsson's profit warning weighed on sector peers. Fears of SIEMENS (-3.02%) issuing a profit warning emerged, with the engineering giant saying it won't comment on the matter. One trader said today's pressure is still residual from Philips' warning in medical technologies yesterday. Also, there was renewed speculation that GE is looking to take a stake in Siemens. More from the rumour mill: traders pointed to a possible VW bid for MAN (+0.35%) in the region of €138/sh, higher than previous speculation of €120-125/sh. In other news, LEONI (LEOGn.DE) (-2.80%) is buying Valeo's wiring harness business for an enterprise value of €255 million. Q-CELLS (-4.47%) corrected comments made yesterday, saying no placement was made by Good Energies of 11.7 million shares via a convertible bond. SR Technics has poached MTU (-4.37%) board member Bernd Kessler. Sydney Airport, in which HOCHTIEF (-2.88%) has a 13.27% stake, plans to spend US$450 million upgrading and expanding its international terminal.

Spain

Strong gains in TELEFONICA (TEF) and COLONIAL made the Ibex Europe's top performing index on Tuesday. However, breadth remained negative on the Ibex amid Ericsson's profit warning, weakness on Wall Street and high oil prices. WTI was trading at US$87.35/bbl at the European close. In local newsflow, TELEFONICA (+2.84%) was top points gainer after Bear Stearns and HSBC raised their target prices. Meanwhile, chairman Cesar Alierta has doubled his stake in the telecoms giant. COLONIAL (+11.25%) benefited after its chairman, Luis Portillo, increased his stake. IBERDROLA (+1.13%) said after the close yesterday that net production for nine months07 rose 30.3% year-over-year following the acquisition of Scottish Power. The CNE authorised Suez to increase its stake in GAS NATURAL (+2.14%) to 11.4%. Carlos Losada, the chairman of Clickair, said a merger between Clickair and VUELING (+17.27%) would be logical, reports website neg-ocio.com. FAES FARMA (-3.92%) has bought animal nutrition firm Ingaso for €20.25 million. CAMPOFRIO (-5.66%) fell on news general director Jose Luis Macho has resigned. SOGECABLE (-0.78%) is due to deliver nine months results after the market close.

Nordics

Stockholm finished Europe's worst performing bourse, with the rest of the Nordic indices also deep in the red. ERICSSON (ERIC) (-23.81%) fell head first as the telecoms giant issued a profit warning. Market talk and local press suggested CEO Carl-Henric Svanberg may have to resign. In the US, Wall Street traded lower at European close, extending yesterday's fall following comments from Fed Chairman Bernanke that the housing slump will exert a drag on US economic growth into early 2008. Crude oil futures continued to surge, reaching US$87.08/bbl. STATOILHYDRO (STO) (-0.27%) outperformed the rest of the market. Citigroup raised target to reflect the oil price upgrade. Back to ERICSSON, which said it expects third quarter sales of SEK43.5 billion vs consensus at SEK45.4 billion, with operating income of SEK5.6 billion vs consensus at SEK9.1 billion and the gross margin at 35.6% vs consensus at 42.8%. WestLB said the profit warning is more than short-term and downgraded the stock to reduce, while S&P Eq Res argued the problems may be more severe than stated. Meanwhile, Goldman and JP Morgan raised target valuation on NOKIA (-3.24%). In earnings, SKF (-3.01%) delivered third quarter results with pretax profit lagging expectations. Finally, on a positive note, according to market researcher AC&M, Russia's mobile phone market increased by 1.1% year-over-year in September, with TELE2 (unch.) adding c.170,000 news subscribers reaching 8 million.


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