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European Indexes Fall

The Spanish real estate market weighed Tuesday morning

From Standard & Poor's European MarketScope

European indexes traded lower Tuesday morning. Wall Street was seen opening flat ahead of existing home sales data. Oil was at US$65.78 a barrel on Nigeria concerns.

UK: The FTSE 100 index slipped further into the red as concerns of a property bubble burst in Spain sent the Ibex 35 index falling. The weakness filtered into other European markets. The pound was back over US$2. BP (BP) (-0.09%) said first quarter net profit fell 17%, hit by a fall in crude prices and production. The replacement cost profit of US$4.36 billion came in below analysts' forecasts.

Among the losers, Yell (-21.06%) shares sank as the telephone directories publisher warned that its US growth will slow to 3% in 2007/08. In the mining sector, BHP Billiton's (BHP) (+0.61%) third quarter copper production was up 22%, boosted by a rise in global demand. Vedanta (+0.64%) said it is planning to buy 71% of India's Sesa Goa for US$1.37 billion.

In other updates: insurer Aviva's (+1.87%) first quarter life and pension sales rose 16%, in line with forecasts. Primark-owner AB Foods (-1.12%) posted a 5% rise in first half adjusted pretax profit, saying that it expects progress in adjusted earnings for the second half. Mobile phone operator Carphone Warehouse (+0.50%) said it plans to raise its fiscal DPS by 30% next year. In other news, BAE Systems (+1.49%) sold its inertial products business for US$140 million. Slough Estates (+2.18%) was firm on bid talk.

France: The CAC 40 index (-0.33%) stayed in negative territory at mid-session. In Paris, Danone (DA) (-2.26%) posted in-line first quarter sales of €3.673 billion, +3.9% (+10% like-for-like). It confirmed 2007 like-for-like sales growth to be 6-8%. However, there is little sign of progress in the Wahaha dispute.

Accor (-3.21%) has agreed to sell its 326 Red Roof Inns to a group led by Citigroup (C) for US$1.32 billion, a price seen as disappointing by some in the market. On the plus side, Alcatel Lucent (ALU) (+2.69%) rebounded strongly from a -3.22% low: soft first quarter revenues were down 8% year-over-year at constant fx tempered by a healthy order book; indeed, Alcatel Lucent announced a new contract from China Telecom (CHA).

Also in the black, Sanofi (SNY)(+0.55%) moved higher on a 5.5% jump in its Zentiva stock. Air Liquide (+1.09%) gained ahead of its first quarter sales numbers expected to show a 2.5% increase in sales. STM (STM) (+1.62%) jumped after solid results from the US' Texas Instruments (TXN).

PSA (+0.8%) moved higher as Les Echos reported that it is mulling further job cuts to adapt itself to declining sales. Amongst second-liners, TF1 (-2.67%) reported first quarter sales of €702.3 million, up 7.3% year-over-year - though Exane BNP Paribas warned this morning that the risk of a profit warning is 'looming'.

Germany: The Xetra-Dax index (-0.65%) traded lower at mid-session Tuesday after Wall Street ended Monday's session in the red. Infineon (IFX) (+0.09%) gained on the Texas Instruments numbers. German property outfits IVG (-1.19%) and IWKA (-1.91%) felt the heat from Spain.

In other news, Siemens' (SI) (-1.84%) supervisory board members are considering replacing CEO Klaus Kleinfeld, whose contract expires in September, wrote FTD. One candidate put forward is Linde's (+0.12%) CEO, Wolfgang Reitzle.

Software AG's (-0.33%) first quarter license sales firmly beat forecasts, coming in at €46.9 million in the quarter to end-March. Maintenance revenues surprised on the downside, with a decline of 6% year-over-year to €44.5 million. All in all, EBIT rose 16% to €25 million. Germany's second-biggest software company said it is well on its way to more than doubling earnings in the next five years.

Comdirect (+1.57%) reported net profit of €16.8 million for the first quarter, better than expected. MTU (+0.95%) saw a number of brokers lift their price objectives on the stock after Monday's solid quarterly results. Bayer (BAY)(+1.36%) was well bid after a target hike at Goldman Sachs.

Elsewhere: All the Nordic bourses continued negative trading. The Spanish benchmark index traded almost 2% lower, undermined by real estate woes.

Claudia Perotti, Lydia Carroll, Sara Oscarsson, Isabell Witt, Michael Sanderson, Gaurav Panchal, Julien Manrique, John West, Ben Marino, Emma Stevenson, Pawan Girglani.

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