Markets & Finance

European Stocks Plunge amid Financial Woes


A roundup or Monday's action on major European stock exchanges

Financials Europe-wide plunge deep into the red as Lehman files for Chapter 11 bankruptcy protection, AIG (AIG) asks the Fed for US$40 billion in short-term financing and Bank of America (BAC) buys Merrill Lynch (MER) for US$50 billion in an all-share deal. Among the big names getting hammered: AEGON (AEG) (-12.67%), ALLIANZ (AZ) (-7.73%), AVIVA (-7.64%) AXA (AXA) (-12.13%), CS GROUP (CS) (-7.98%), COMMERZBANK (-11.09%), DEUTSCHE BANK (DB) (-8.27%), FORTIS (-11.76%), FRIENDS PROVIDENT (-9.84%), GENERALI (-3.97%), ING (ING) (-7.68%), OLD MUTUAL (-10.3%), PRUDENTIAL (PUK) (-9.3%) RSA INSURANCE (-5.07%), SANTANDER (STD) (-5.29%),UBS (UBS) (-14.63%), and UNICREDIT (-6.74%).

LONDON

The FTSE 100 extends losses at mid-session, as financials go into meltdown. Lehman’s Chapter 11 move and reports that insurance giant AIG approached the Federal Reserve seeking US$40 billion in short-term financing, stoked fears across the sector. U.S. futures sink, suggesting a black day for US markets.

At home, HBOS (-32.3%) is the worst hit as the Lehman situation highlights funding worries. BARCLAYS (BCS) (-16.41%) confirmed it had decided to walk away from a Lehman tie-up after deciding it was not in the interest of its shareholders. RBS (-13.75%) also feels the pain. Insurers plunge: AVIVA (-8.34%), PRUDENTIAL (-10.25%), FRIENDS PROVIDENT (-9.7%), and RSA (-5.64%).

Sentiment going into Christmas is worse than ever, according to SAINSBURY’s (-4.25%) boss Justin King, the FT writes. CABLE & WIRELESS (-1.15%) has accelerated plans to break itself up by announcing the GBP4.5bn demerger of its international business as early as the end of this month, The Sunday Telegraph writes. EDF could table an increased bid for BRITISH ENERGY (-1.57%) as early as this week, according to The Sunday Express. SCOTTISH & SOUTHERN (-1.23%) is in focus on reports Swedish group Vattenfall has singled out Britain as its next big target market.

PARIS

The CAC 40 (-5.38%) -- with all constituents in negative territory -- remains very deep in the red amid news Lehman Brothers has filed for bankruptcy protection. Adding to U.S. financials’ woes, insurer AIG has approached the Federal Reserve seeking US$40bn in short-term financing. Furthermore, Bank of America has agreed to buy Merrill Lynch for US$50 billion in an all-stock deal. Wall Street is set for a grim open.

Locally, SOCGEN (-13.82%), CREDIT AGRICOLE (-13.65%), AXA (-11.28%), BNP PARIBAS (-9.96%), DEXIA (-9.46%) tumble. With WTI down over US$5.00 at US$96.04/bbl, TOTAL (-5.9%) is the biggest blue chip weight. VALLOUREC (-5.05%) and wider-market listed TECHNIP (-8.1%) take a knock.

MICHELIN (-5.09%) skids as peer Continental warns on profits, saying they could be squeezed below what it had forecast by sluggish sales in Europe and North America and rising raw material costs.

According to Le Journal du Dimanche, EADS’s (-4.71%) Airbus unit faces further production delays for its A380 aircraft and will deliver between eight and ten of the jets this year instead of the 12 announced. Gerard Le Fur, the chief executive ousted from SANOFI AVENTIS (-2.59%) last week after less than two years in office, could receive up to EUR 8m this year from the group before he stands down in December, the FT reports.

FRANKFURT

As oil slips under US$98 a barrel, Xetra-Dax (-4.1%) remains firmly lower, with the American banking crisis weighing on global equity markets. Lehman Brothers, from whom HANOVER RE (-7.75%) has shares and bonds worth EUR 23m, faces bankruptcy and troubled Merrill Lynch is to be taken over by Bank of America. DEUTSCHE BANK (-9.51%), COMMERZBANK (-11.81%), HYPO REAL ESTATE (-3.76%) take a hit.

In other news: CONTINENTAL (-0.36%) warned on this year’s earnings. The tire maker expects its EBIT margin will be about 8.5% in 2008. It had aimed for more than 9.3%. BASF (-4.52%) is set to make an offer of 50 Swiss francs per share for CIBA. It seeks at least 66.67% of the Swiss group’s stock. BAYER (-2.3%), meanwhile, does not see itself as vulnerable to a takeover, its CEO told Tagesspiegel, though added that in the current environment anything is possible. This follows recent rumours the drugs and chemicals giant is being pursued by Pfizer.

According to the FT, DEUTSCHE BOERSE (-6.49%) is seeking the help of a Singaporean sovereign wealth fund to fend off recent attacks on its strategy from activist hedge funds. Russian airline S7 has indicated an interest in AIR BERLIN (-4.73%), reports Die Welt. According to Der Spiegel, TUI (-6.53%) is considering a sale of its airline TUIfly to Air Berlin. Finally, GEA’s (-2.75%) CEO, Wolfhard Leichnitz, is to resign. His duties are to be taken over by board member Bernd Kottmann.

AMSTERDAM

The AEX (-4.08%) is continuing its steady descent with all but one of its constituents in the red. Wall Street is also set for a day of pain as turmoil among financials continues. Lehman Brothers has filed for Chapter 11. Press reports emerge that insurer AIG has approached the Federal Reserve seeking US$40 billion in short-term financing. Furthermore, Bank of America has agreed to buy Merrill Lynch for US$50 billion in an all-stock deal. ING (-7.56%), FORTIS (-12.84%) and AEGON (-12.03%) plunge into the red.

Good news for some as WTI falls to US$97.30/bbl as Hurricane Ike looks not to be causing much damage. ROYAL DUTCH SHELL (-3.15%) and SBM (-6.14%) fall.

Switching to telcos, Matthew Key, head of Telefonica Europe, has told German daily Die Welt the Spanish operator is not interested in making a bid for KPN (-1.24%). The only AEX constituent in the black is DSM (+0.85%), which benefits from Merrill Lynch upgrading its 2008 EPS estimates by 15% on the basis of higher vitamin prices.

In other broker news, UBS adds REED ELSEVIER (-2.00%) to its Most Preferred List and ING downgrades TNT (-4.68%) to hold. None of the turmoil will affect shareholders of SMIT INT (+27.35%) which soars as, BOSKALIS (-7.83%) says it will make a EUR 1.113 billion (EUR 62.50/sh) cash offer. The offer represents a 30% premium. Boskalis has invited Smit management to enter into discussion, with the hope of securing its approval for the transaction.

NORDICS

Nordic equity markets fall further into the red as Wall Street looks set to tumble following news Lehman Brothers has filed for bankruptcy protection.


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