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European Indexes Close in the Red

From Standard & Poor's European MarketScope

The major European indexes fell Monday, mirroring weak morning trading on Wall Street. Concerns about oil-triggered inflation were again in investors' minds, outweighing relatively good economic data on the continent. News of a possible ntl-Virgin Mobile merger raised concerns over increased competition in the telecom sector. Oil futures crept up to US$59.95 per barrel on fears that cold weather in the US Northeast will increase demand.

United Kingdom:The FTSE 100 index (-0.32%) ended lower, weighed down by falls in telecoms and media companies. Chancellor to the Treasury, Gordon Brown slashed the UK growth forecasts, as expected, while a hike in the North Sea tax hit Centrica (-1.38%). Ntl confirmed reports that it was in talks over a £3.23 per share bid for Virgin Mobile (+10.13%), pressuring pay-tv group BSkyB (-2.77%), BT (BT)(-0.7%) and ITV (-1.36%). But Vodafone (VOD)(+1.63%) bucked the trend, rising from earlier losses on news that outgoing HSBC chairman John Bond will be its new chairman from July 2006.

British Airways (BAB) ended flat after reporting a rise in passenger load factor in November to 73.2%, with traffic up 6.3%. BAT (BTI)(+1.26%), Imperial Tobacco (ITY)(-0.34%), Altria (MO) and Altadis were all said to be interested in bidding for a 52% stake in Egypt's state-owned tobacco company. The LSE (+0.83%) might seek a white knight merger with OMX in case of a Macquarie bid, The Business newspaper reported. Macquarie has to either produce a bid for the LSE or walk away by December 15. Citigroup downgraded Johnston Press (-2.24%) to sell, on concerns on the weak advertising market and that it may overbid for Northcliffe.

France: The CAC 40 index (-0.26%) fell further at the close, with a negative breadth of 23-16. Total (TOT)(+0.32%) remained positive. France Telecom (FTE)(-1.58%) was among the main drags on the index on fears of a bidding war as NTL and Virgin engaged in merger talks. Sanofi (SNY)(-0.42%) was hurt by news it could be interested in bidding for Switzerland's Serono (SRA).

Among the gainers, Danone (DA)(+2.0%) soared in the afternoon after Carrefour (-1.03%) said its furnishers are proposing price hikes of between 4%-6%, while 'star products' could see increases in the double digits. EADS (+3.3%) grabbed the headlines after securing a US$9.7 billion order from China for 150 Airbus. The aerodefence group has also signed a €150 million deal with China to build a TGV line. STM (STM)(+0.06%) remained in focus after confirming it will supply Intel (INTC) with any mobile-phone memory chips Intel fails to produce. Pernod Ricard (+2.3%) gained after its CEO said in an interview with Le Journal des Finances that he is considering a share split and bonus share issue. Small-cap Groupe Flo (-12.34%) took a knock on news that financier Albert Frere is eyeing a controlling stake at €6.61/share.

Germany: Germany's Xetra Dax index fell in late trading, ending the session down 0.77% with utilities, chemicals, telecoms and some financials to blame. In Frankfurt, both E.On (EON)(-1.41%) and RWE (-0.85%) were lower. RWE fell after a report in Der Spiegel pointed out that the utility has known for at least two years that 60% of its utility poles have material defects.

Broker action sent Deutsche Bank (DB)(-1.21%) lower as UBS downgraded the stock to neutral, but Deutsche Bank, the broker, sent Allianz (AZ)(+0.55%) higher as it raised the price target on the stock. SAP (-0.88%) fell on profit-taking, despite comments from CEO Kagerman that the software giant is aiming to boost its operating margin to 30% from current levels of over 20%. In the broader market, Depfa (-6.29%) plunged as Moody's placed its ratings under review for a possible downgrade. Medion climbed 4.82% on the back of a new sales campaign for SIM cards.

Elsewhere: Stockholm and Copenhagen ended lower Monday, but Oslo and Helsinki escaped the negative trend. Nordic newsflow retained the M&A bias it had last week, only that instead of TDC (-0.13%), the focus was now on Danisco (+1.30%). Berlingske Tidende suggested the Danish group may be worth as much as DKK27 billion and highlighted value in the group's property assets. OMX (+0.94%) also bucked the trend as weekend press in the UK reported that it could be a white knight for the London Stock Exchange. MTG (+0.48%) gained on news that it is buying a further stake in Nordic Betting. Prepared by Zaida Espana, Valerie Vidal, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, Julien Manrique, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

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