A roundup of Monday's action on major European exchanges
The FTSE 100 plunged towards the close to end an eye-watering 3.86% lower as plummeting financial stocks tightened the screws after news that JP Morgan paid just US$2/sh to acquire Bear Stearns. ALLIANCE & LECISTER (-7.17%), HBOS (-12.78%), ROYAL BANK OF SCOTLAND (-8.69%), BARCLAYS (-9.35%) - all got a bear hug. Shares of MF Global fell 78% on worries that the crisis could spread to other institutions hitting shares of MAN GROUP (-10.17%), which owns 18.6% in the NYSE-listed broker. The US$ took a pounding after the Federal Reserve yesterday cut the discount rate on direct loans to banks to 3.25% and said it would set up a new lending programme. Wall Street indices crumbled as the latest 'fire sale price' of Bear Stearns shook investor faith in US banking. WTI boiled at US$105.89 a barrel, while gold was at US$1,008/oz. Local earnings updates brought further bad tidings for US housing. WOLSELEY's (-9.21%) 1H trading profit slumped 23% as the building materials group warned business conditions in a number of markets will become more challenging. However, M&A was still alive and kicking: BRITISH ENERGY (+11.20%) confirmed it was holding discussions which could lead to an offer or a business combination. In other news, INFORMA (-8.78%) CEO David Gilbertson resigned to join EMAP as chief executive.
The CAC 40 (-3.51%) closed firmly lower, with all constituent stocks in the red. Wall Street remained in bleak territory, with the financial world rocked by JP Morgan's buyout of crisis-hit Bear Stearns for US$236m, or US$2/sh, and the Fed cutting its discount rate by 25bp. The US$ tumbled and Asian markets closed deep in the red. The Bear Stearns debacle put the valuation of financials under the spotlight: BNP (-4.69%), SOC GEN (-8.39%), CREDIT AGRICOLE (-4.58%), AXA (-5.95%). Elsewhere, EADS (-12.68%) was hit further by fx woes. AIR FRANCE-KLM (-4.38%) agreed to acquire Alitalia for less than one fifth of its market price at Friday's close. Alitalia's board has voted unanimously to accept the EUR 139m all-share offer, though the deal has further hurdles to jump. ARCELOR MITTAL (-3.32%) said that, following the recent dividend payment, it has decided to lower the price offered to minority shareholders of its Brazilian unit Inox Brasil, now prepared to pay BRL94.55 per ordinary share (vs BRL100 previously) and BRL94 per pref share, for a total of US$1.76bn. In the wider market, BIOMERIEUX (-1.62%) posted FY07 net profit of EUR 98.1m, down 6.9% y/y, but raised its 2012 target for operating margin before non-recurring items to 16-17% at constant FY07 fx. HAVAS (-3.0%) has entered into a spat with Sir Terrance Conran over the use of his name, The Sunday Times reported.
There was no saving the day for Xetra Dax (-4.18%) today as the index finished the day deeply in the red. Across the pond, Wall Street was trading lower as investors continued to digest the sale of Bear Stearns to JPMorgan for a mere US$2/share. Some investors are now ogling a full point cut by the Fed tomorrow. German financials shared the pain: COMMERZBANK (-7.04%), DEUTSCHE BANK (-6.03%), POSTBANK (-6.05%) and HYPO REAL ESTATE (-12.45%) all ended firmly lower. TUI's (-4.78%) Executive Board and Supervisory Board decided to prepare a separation of Hapag Lloyd container shipping. Meanwhile, Die Welt am Sonntag reported that Russian oligarch Alexei Mordachov intended to raise his stake in the company to 'at least 10%'. More doom came from SIEMENS (-17.08%) which issued a profit warning for the current fiscal year and expected a negative impact on earnings of c.EUR 900m in 1Q08. LINDE (+0.05%) said today that it sees profit rising faster than sales this year. It sees operating profit of over EUR 3bn, in line with expectations for 2010. VW's (+4.32%) CEO Martin Winterkorn said he expected to remain a manager in the company after PORSCHE (-5.48%) becomes the majority shareholder, FAZ reports. Finally, DEUTSCHE TELEKOM (-2.63%) entered into a purchase agreement for a 20% stake in Greek telecommunications company OTE.
The SLI (-5.21%) closed firmly in the red, with as Wall Street in bleak territory. News that JP Morgan is to acquire Bear Stearns for only US$2/share weighed on financials. Rumours that people are reluctant to deal with UBS (-13.85%) did not help. The troubled bank was in further focus following a SonntagsZeitung report that it may cut as many as 8,000 jobs globally. Separately, following the split of Dresdner Bank into two, hopes grew that UBS might do the same. In earnings news, HELVETIA (-2.68%) reported FY net income of CHF402m. BELIMO's (-4.02%) 2007 EBIT improved to CHF57.5m, representing an operating profit margin of 15.5%. TORNOS (-4.82%) closed the year with net profit of CHF35.1m, including exceptional items totalling CHF6.2m and deferred tax credits of CHF3.4m. KUDELSKI (-4.32%) has announced the acquisition of EDSI, a provider of secure smartcard solutions for Pay TV and banking applications. Reuters reported that Tui's shipping unit Hapag-Lloyd could be purchased by a consortium led by Klaus-Michael Kuehne, majority owner of KUEHNE & NAGEL (-3.07%). CLARIANT (-5.8%) has made several changes to its Board. In FX moves, the Swiss franc rose well above US$ parity after the Fed lowered its discount rate over the weekend. Indications are that this will be followed by a 100bps cut to the Fed funds rate tomorrow.
The AEX (-3.79%) closed firmly lower on Monday. Chief Investment Strategist at Standard & Poor's, Sam Stovallis said 'investors are wondering if Bear Stearns is the Drexel Burnham of this market turmoil, sounding the final lap of this downward spiral, or simply the first of many major tombstones to be erected in remembrance of financial institutions that succumbed to subprime mess'. Locally, financials felt the pressure: AEGON (-4.92%); FORTIS (-4.9%); ING (-4.44%). In local news, ROYAL DUTCH (-4.16%) gave a strategy update, saying 2007 yr-end net reserves are flat y/y. ARCELOR-MITTAL (-3.22%) decided to lower the price offered to minority shareholders of its Brazilian unit Inox Brasil and now pay BRL94.55 per ordinary share. CORPORATE EXPRESS's (-10.11%) shareholders have pressed CXP to start talks with Staples, according to FD. They expect a higher offer than the current EUR 7.25 per share that Staples offered, but want to prevent the US company from withdrawing altogether. In the biotech/chemical sector, MorphoSys signed an agreement with CRUCELL (-3.39%) and DSM (-2.65%) to allow MorphoSys to use their PER.C6 cell line. AKZO NOBEL (-3.57%) started its EUR 1bn share buyback programme today. Elsewhere, Fursa cut its stake in ASM INTL (-4.68%) to 9.85% from 10.31%.