European Indexes End Sharply Lower

From Standard & Poor's European MarketScope

European indexes performed terribly Monday tracking losses across global markets. Concerns about inflation continued to create a general air of uncertainty, encouraging investors to move out of equities. The WTI traded at US$67.70 on the Iranian OPEC governor's statement that the cartel will not cut production.

Germany: The Xetra-Dax index (-2.43%) closed deeply in the red. In Frankfurt, exchanges were in focus. The NYSE (NYX) made a bid for Euronext in a share-based offer, with a cash component, countering Deutsche Boerse's (-8.62%) merger proposal with the Paris-based bourse. Euronext's shareholders have to decide between the two offers Tuesday.

Elsewhere, BASF (BF)(-1.05%) raised its offer for Engelhard (EC) to US$39 per share. DaimlerChrysler (DCX) (-1.41%) may face a US$640 million fine to settle a US government investigation of alleged bribery, Der Spiegel said on Saturday. Infineon (IFX) (-0.46%) said it has reportedly been selected by Microsoft (MSFT) as a development partner for prepaid and subscription computing. It will help develop specialized security chips for Microsoft's FlexGo software.

Mittal Steel (MT) will have to offer ThyssenKrupp (-7.92%), under pressure from falling commodity prices, alternative assets if it is unable to sell Canada's Dofasco. Germany's regulator will probe Deutsche Post's (-3.2%) package pricing as Hermes Logistik has claimed Europe's biggest postal service hampers fair competition with low prices, reported Die Welt. In the MDAX, Pfleiderer (-12.96%) tumbled as its CEO sold €5 million worth of shares.

UK: London shares closed in the red for the fourth day running, as inflationary concerns melted commodities and cooled off crude prices. The FTSE 100 index slumped to close down 2.2%. On the trading floor, banks knocked 24 pts off the index. However, Alliance & Leicester (+2.51%) rallied after Credit Agricole confirmed it was considering a bid for the group.

Weekend reports put a possible bid from the French bank at £6 billion. Mining stocks wiped 21 pts off the blue-chip index, as metal prices retreated on concerns over economic growth. Banking heavyweights HSBC (-3.08%) and Standard Chartered (-3.16%) tracked sharp falls in Asian markets.

M&A talked continued. BAA (-1.56%) confirmed that it would return cash to shareholders if talks with the Ferrovial consortium failed. Kingfisher (-2.83%) reportedly rebuffed an approach from 3i (-2.85%). LSE (-4.42%) was in focus as the NYSE unveiled a share and cash bid for Euronext. On the reporting front, Punch Taverns' (-9.62%) first half numbers beat estimates. The pub operator said it may sell a further 380 pubs.

France: The CAC 40 index ended the session broadly lower hit by massive sell off. In Paris, M&A stories filled the headlines. Arcelor (-5.57%) plunged as it indicated it would examine Mittal's revised hostile offer. Euronext (-9.45%) plummeted after NYSE unveiled plans to merge the two groups to form an entity worth US$21 billion. Traders noted that NYSE's bid level was below the current share price. Meanwhile, D. Boerse denied an FT report that it was mulling a rival €90/sh bid and said it was not considering paying a premium over the market price.

Credit Agricole (-3.73%) confirmed that it was considering a bid for UK's Alliance & Leicester. The Times said Sebastian Holdings' Alexander Vik had asked Vodafone (VOD) and Lagardere (-1.64%) for their support in a potential break-up bid for Vivendi (V)(-1.11%). Centrica was demanding that the EU Commission halts a proposed merger between Suez (SZE)(-3.12%) and GdF (-2.60%) The Mail on Sunday wrote.

Elsewhere, Total (TOT)(-2.45%) was hit by lower oil prices. Meanwhile, JP Morgan initiated Thales (-4.31%) with an underweight rating. Finally, the European Commission agreed on Axalto's (-1.86%) merger with Gemplus (-1.83%) with conditions; SocGen upgraded both stocks to buy.

Elsewhere: In Switzerland, the local index lost 2.42%, led lower by companies with heavy Asian and emerging market exposure after key indices plunged in today's session (Nikkei -1.84%, Hang Seng -3.11%, Sensex -4.2%). J Baer (-7.37%) and ABB (ABB)(-7.96) were among the key Swiss decliners today.

Stockholm (-5.09%) beat Oslo (-4.88%) by a hairbreadth to the bottom, on a Monday where few stocks ventured above the gainline.

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