A roundup of Monday's action on European exchanges
The FTSE 100 closed over 1.2% lower Monday, tracking a fall on Wall Street as Citigroup suspended share buybacks and credit woes returned. Also, big US banks are to create a fund to support the struggling ABCP market. Among those to escape the fall were energy stocks - fired up by the WTI trading at US$85.30/bbl as political tension between Turkey and Iraq and crude supply worries weighed. BP (+0.57%) and ROYAL DUTCH SHELL (+0.69%) burned bright. Also, HSBC cut the price target on BP, but reiterated overweight. Chemicals also gained catalysed by M&A talk. JOHNSON MATTHEY (+9.92%) rocketed on talk that US firm Praxair could bid as much as £20/sh. Among other big movers, NORTHERN ROCK (-20.86%) slumped after saying proposals received so far are preliminary in nature. In trading updates, SABMILLER (-4.72%) said it has continued its strong start to the year, with organic growth in lager volumes of 11% for 6M ended 30 September. Among insurers, Swiss Re confirmed it is in talks with STANDARD LIFE (-3.20%) about certain RESOLUTION (-0.49%) assets. Also, the Takeover Panel set 25 October as put up or shut up deadline for Pearl and STANDARD LIFE to bid for RESOLUTION. In broker notes, LEGAL & GENERAL (-4.44%) fell after JP Morgan said the sell-off is not yet over and sees an 8% downside.
The CAC 40 (-0.62%) fell into negative territory as Wall Street took a firm turn into the red. The suspension of Citigroup's buy back program and the spectacle of WTI breaching US$85/bbl send shivers down investors' spines. In Paris, TOTAL (+1.51%) benefited from the hike in oil prices sustained by geopolitical jitters surrounding the worsening relationship between the US and Turkey and the latter's threatening stance towards the Kurds in Northern Iraq. LVMH (+2.55%) achieved nine months revenues of €11.446 billion, reflecting organic growth of 13% compared to the same period in 2006. SUEZ (+0.89%) and GDF (+0.82%) have reportedly stated that the merger will occur in first half08, that they will invest €10 billion a year from 2008 to 2010 and that they are looking for 10% EBITDA growth in 2008 and €17 billion EBITDA in 2010. DANONE (+1.11%) will sell its 20% interest in Chinese company Bright Dairy, Reuters reported. Staying in the Far East, though on the downside, ARCELOR MITTAL (-0.51%) has bought 90% of China's Rongcheng Chengshan Steelcord for US$26.6 million. EADS (-0.76%) has delivered its first A380 superjumbo today to Singapore Airlines, with EADS's CEO telling the press that cost cutting plan Power 8 is 'on track.' UBS downgraded PSA (-3.7%) to sell from neutral. Financials weighed heavily: SOCGEN (-2.27%), AXA (-2.31%), BNP PARIBAS (-1.78%).
With Wall Street trading lower, Xetra-Dax (-0.9%) ended Monday's session firmly in the red. The global financial sector was once again a focal point as banks on both sides of the Atlantic are understood to be planning a fund to buy mortgage linked securities in an attempt to allay fears about a credit crunch. Meanwhile, on the M&A front, SocGen is ready to make an offer of €35 a share for COMMERZBANK (unch), Italian daily Libero Mercato reported on Saturday. There was unconfirmed talk that SALZGITTER (-0.95%) is eyeing GEA (+1.19%). Speculative banter aside, a big investor placed 11.7 million Q-Cell (+2.37%) shares via a convertible bond. The FTD reported that DAIMLER (-0.56%) wants to expand in emerging markets in commercial vehicles. BMW (-0.89%) sold 36,300 units in China in the first nine months of this year, a 37% year-over-year rise. BAYER (+0.26%) said a three-year analysis demonstrates a continued robust treatment effect of Alemtuzumab compared to Merck's (-0.29%) Rebif. NORDEX's (+3.20%) orders book is full for the next two to three years, with the wind turbine maker having to decline new orders coming in, its chairman told Sueddeutsche Zeitung. Key broker action included Merrill Lynch adding RWE (+0.37%) to its most preferred list and Deutsche lifting its target on E.ON (+0.77%).
The Ibex ended in the red on Monday, extending losses in late trading as US equities took a tumble after Citigroup exacerbated credit crunch fears by suspending share buybacks and WTI breached the US$85/bbl mark. Breadth is 36-4 negative, with even the positive stocks off intraday highs. Banking heavyweight SANTANDER (+0.8%) did its best to alleviate the downside. The banking major was given a boost by upbeat broker comments. Both UBS and Merrill Lynch resumed coverage of SANTANDER with buy recommendations. ACS (+0.23%) was also buoyed after JP Morgan raised its target to €60 from €56 and reiterated overweight. On the downside, TELEFONICA (-0.14%) took a pause for breath after recent strong advances following last week's investor day. Cheuvreux downgraded the stock to outperform from selected list on valuation grounds. Broader market listed VUELING (-17.53%) plunged further after Planeta ruled out buying out the low cost carrier. Jose Manuel Lara, owner of Planeta, has said he is interested in joining the bid battle for IBERIA (-0.85%).
Oil-heavy Oslo finished as Europe's leading bourse and the only index in the black, while the rest of Nordic bourses remained in negative territory. WTI soared to US$85.20/bbl amid political tension between Turkey and Iraq along with crude supply worries. OPEC's monthly oil market report show it forecasts a higher demand for its oil in fourth quarter07. US markets traded in the red at European close. In the Nordics, UPM (-7.93%) was next in line among Nordic companies to issue a profit warning; it said third quarter core earnings excluding items will be lower year-over-year due to fx conditions and increased wood prices. STORA ENSO (-6.55%), M-REAL (-4.76%) and NORSKE SKOG (-5.05%) were hit. Moving on, H&M's (+0.94%) September sales figures surprised on the upside, coming in at 25% vs 20.8% forecast, following a 11% rise in August. NOKIA (-2.25%) is set to deliver third quarter results on 18 October. Consensus is looking for a 62% year-over-year rise in EPS to €0.34. JP Morgan raised its target for the mobile phone giant, while ABN downgraded the stock to hold. Back to earnings, ahead of its third quarter results tomorrow, consensus expects solid results across the board at SKF (-1.40%). ABN initiated coverage with a hold. TOMRA (+0.82%) also delivers results tomorrow. Consensus is looking for a 36% fall in third quarter EBIT. In further broker action, Morgan Stanley upgraded YARA (+1.41%) to overweight.