European stock markets closed lower on Friday, as wall Street traded in the red, dragged down by pharmaceutical and chip players. U.S. markets traded lower as oil prices surged on concerns of tight heating oil supply this winter, and Fed Chairman Alan Greenspan's comments that current account deficit would at some point begin to hurt foreign demand for dollar-denominated assets. In London, the Financial Times-Stock Exchange 100 lost 44.50 points, or 0.93%. to close at 4760.80. FDA medical reviewer David Graham yesterday said current FDA procedures may not prevent harm to patients from AstraZeneca's Crestor and GSK's Serevent, among other drugs reviewed. Graham was addressing a congressional hearing on the recall of Vioxx (Merck & Co.) in Washington. Pharma stocks took a predictable battering with GSK, AstraZeneca and Shire Pharma all led the FTSE down. EMI, the only major company to report today, skyrocketed 13.27% after saying it had seen an improving trend in the global recorded music industry with first-half down 1.3%, vs -9.6% year-over-year. The company recorded a 7.3% drop in first-half pretax profits to 36.9 million pounds from 39.8 million pounds on a 11.4% decline in group turnover to 851 million pounds from 960.3 million pounds. The company says the result, in line with expectations, reflected the weighting of its music release schedule to the second half, with fewer major releases in the first half. Meanwhile, supermarket group WM Morrison suffered after research showed it had yet to recover mkt share lost as result of its takeover of rival Safeway earlier this year. Reuters gained 2.06% after rumours it was to sell its stake in Instinet Group, although the company denied the report.
Germany's DAX lost 43.79 points, or 1.95%, to close at 4134.89. Frankfurt reversed early gains and finished down for the day. Profit-taking ahead of this weekend's G20 forum in Berlin was blamed on Greenspan comments. The U.S. Federal Reserve chairman was speaking in Frankfurt and said that foreign investors would tire of financing the record current account deficit. He also said that interventions from central banks have little impact on exchange rates. This pushed the dollar lower. A semiconductor sector downgrade by Goldman Sachs reversed intraday gains for Infineon and the stock ended down 0.11%. Commerzbank, HVB, and Deutsche gave up gains after commenting about the state of the German banking sector and announcing cost-cutting programmes. Siemens CEO H. von Pierer said the strengthening euro, vs. the U.S. dollar increasingly represents a problem for Siemens, whose products have become 30% more expensive over recent months.
In France, the CAC-40 lost 31.61 pionts, or 0.83%, to close at 3798.78. Drug makers weighed on indices in Europe and the U.S. as investors rotate out of the pharma sector following evidence given yesterday that current FDA procedures may not prevent harm to patients from certain drugs. In this context, Sanofi-Aventis underperformed the index. However, S&P IER has Sanofi as its top pick in the sector, as it argues it offers limited downside risk and strong pipeline. STM was pulled 1.98% lower as Goldman Sachs downgraded the U.S. chip equipment sector to cautious from neutral. On the up, Dexia continued to benefit from speculation it will merge its asset management arm with SanPaolo-IMI's Fideuram. Vivendi Universal paid 1.1 billion euro to lift its stake in Maroc Telecom to 51% from its current 36%. Meanwhile, a Moroccan government minister said the IPO price for the flotation of the group next year will be less than that paid by Vivendi. Cap Gemini surged 2.3% on reports it will sell its loss-making North America unit, although the group denied this. Publicis jumped 1.5% after disclosing it expects to generate revenue growth of between 4.5% to 5% in 2005, outpacing industry growth of 3% to 4%, according to Reuters.
Asian markets were mixed. Japan's Nikkei average ended flat on Friday as gains in tech stocks were countered by losses in financials. Technology names rose following optimistic comments by Intel on its operating performance for 2005, with Advantest Corp climbing 1.53% while Tokyo Electron gained 1.22%. But automakers extended losses from Thursday, with Honda Motor slipping 0.78% while Toyota Motor shed 0.25% on news that it would recall over 540,000 vehicles to fix faulty brake lights. Starbuck Japan jumped 2.37% after it posted record first-half profit on Thursday.
Hong Kong's Hang Seng index slipped 12.14 points, or 0.09%, to close at 13,787.68.
Canada's benchmark TSX/S&P lost 12.14 points, or 0.14%, to close at 8,959.40.