Turmoil in Chinese markets and a sharp decline in New York rocked bourses Tuesday
From Standard & Poor's European MarketScope
European indexes took a dive Tuesday as Wall Street also traded deep in the red. The primary spark: a plunge in Chinese stocks after Beijing raised the reserve ratio for financial institutions by 0.5% to 10% on Monday. This raised concern that more hikes are in the offing, to absorb liquidity. There was concern that China would also tighten stock market rules to curb speculation.
Oil was at US$61.90 per barrel amid wintry weather in the US and as the standoff over Iran's nuclear intentions continues.
UK: The FTSE 100 index plunged 2.31% after mining and banking stocks took a downhill ride. Mining stocks melted triggered by taxation fears in South Africa. In the banking sector, the Chinese reserve ratio hike sent stocks running for cover. Standard Chartered (-3.91%) booked a 19% jump in fiscal year pretax profit, beating forecasts by a thin margin.
Europe's largest bank HSBC (HBC) (-1.05%) said it was looking to increase its investment in El Salvador. In the energy sector: Cairn Energy (-2.52%) said it would return £481 million of the proceeds from the flotation of its Indian business, Cairn India, to shareholders.
News and information provider Reuters (RTRSY) (+1.41%) provided the silver lining on a cloudy day, helped by a Credit Suisse upgrade to outperform ahead of fiscal year figures on March 1.
France: The CAC 40 index (-3.02%) tumbled, with all component stocks closing in the red. Total (TOT) (-2.35%) was the biggest points loser, holding the blue chip index back 16.7 points. Axa (AXA) (-4.27%) announced that it is in talks to buy South Korea's Kyobo Life Insurance's car insurance unit. Arcelor Mittal (-5.61%) fell, with commodities in focus on the China rate talk.
Among companies reporting results, Air Liquide (-2.02%) said fiscal 2006 revenue amounted to €10.949 billion, up 5.7%. fiscal 2006 net profit was €1.002 billion, up 11.4%. Saint Gobain (-3.98%) has no plans to sell one of its units or break itself up, the FT reported, citing an interview with CEO Jean-Louis Beffa. It suffered along with other cyclical stocks: Bouygues (-5.23%), Accor (-4.69%) and Lafarge (LR) (-4.65%) all took a hit.
SocGen (-2.24%) has agreed to buy Brazil's Banco Cacique. KPN's E-Plus Mobilfunk unit may outsource the management of its mobile network to Alcatel-Lucent (ALU) (-3.26%) in an agreement that could be worth €1.5 billion, the FT said. Converium has rejected an unsolicited offer from Scor (-5.28%) valuing the Swiss reinsurer at US$2.5 billion.
Germany: As global markets were hit by a major sell-off Tuesday, the Xetra-Dax index followed the trend and lost 2.96%. Henkel (-5.74%) proposed a one to three share split to make its stock, which is one of the highest priced on the Xetra-Dax, more attractive to individual investors. The fiscal 2006 figures were no surprise as preliminary figures were previously reported.
Neg-ocio.com wrote that Deutsche Boerse (-4.02%) could present an offer for BME, the Spanish stock exchange operator, on Friday. DaimlerChrysler's (DCX) (-3.54%) CEO, Dieter Zetsche, said all options are available regarding the future of Chrysler, and that selling the troubled US unit is possible. He faces questions over Chrysler when he arrives in London tomorrow for an investor relations roadshow.
On the earnings front, United Internet's (-5.27%) numbers fell short of high expectations. Germany's second-largest internet service provider reported a 24% rise in fourth quarter pretax profit to €34.6 million on sales 37% ahead year-over-year at €353.6 million. Looking ahead, Munich Re's (-3.01%) fiscal 2006 numbers are due out tomorrow. The consensus put net income at €3.54 billion, up 29% year-over-year.
Elsewhere: The Ibex 35 index and SMI (-2.97%) fell sharply on Tuesday along with other world markets.