European Indexes Fall

A weak US$ weighed on companies with heavy exposure across the Atlantic, Monday

From Standard & Poor's European MarketScope

European indexes were dragged down by a weak dollar Monday morning. Crude slipped below US$60/bbl, hitting oil stocks. Futures pointed to a flat open on Wall Street; retailers were in focus as Wal-Mart (WMT) reported weak November sales.

UK: The FTSE 100 index fell at mid-session. The £ hits a two-year high vs. the weak US$. Hometrack said British house prices in November rose the fastest since August 2004. Amongst sectors moving, house builders were among the top gainers after Wilson Bowden (+13.11%) confirmed that it is in talks with a number of parties. Persimmon (+1.67%), Berkeley (+3.91%) and Redrow (+2.80%) gained.

In travel operators, MyTravel (+9.51%) said it is in talks with rival First Choice's (+14.40%) main holiday package business. First Choice confirmed that it is in talks. In company news, BAE Systems (-3.66%) went into a tailspin on reports that Saudi Arabia may pull the plug on the £76 billion Eurofighter deal and hand over the contract to Dassault.

British Energy (+1.55%) was up after Deutsche Bank reiterated its buy rating in a note, according to traders. Steelmaker Corus (CGA) (-0.94%) is to adjourn its EGM on Dec. 4, the date when shareholders were to vote on the Tata Steel offer, to Dec. 20 to give Brazil's CSN more time. Cairn Energy (unch.) set a price range of US$6.32 billion to US$7.50 billion for the India unit flotation.

France: The CAC 40 index (-0.45%) slipped into the red at mid-session. Deutsche Bank downgraded LVMH (-2.26%) to sell. It said that the recovery in Japanese consumption has stalled, while slower growth in the US and China will hurt the cognac business.

The French government plans to increase its stake in EADS (-0.69%), according to Boersen-Zeitung. Separately, Airbus expects to receive US and European certification for the A380 by Dec. 13, Gulf News reported. Publicis (-1.20%) will drop out of the CAC 40 index. Vallourec (+0.10%) will join in its place.

Thomson (-0.28%) will cut half of the jobs at its factory in eastern France. Italy's Eni said it is not planning to launch a bid on Technip (-2.87%). The Italian Industry Minister said that Air France-KLM (AKH) (-2.31%) is not the solution for Alitalia. Euronext's (-2.41%) creditors approved a plan that's seen as a crucial step toward a final agreement to cut Euronext's €6.2 billion of debt by more than half. Gemalto (+2.07%) won a US security contract.

Germany: The Xetra-Dax index (-0.84%) traded firmly lower at mid-session Monday. The weak US$ weighed heavily on the auto sector: DaimlerChrysler (DCX) (-2.39%); VW (-1.61%); BMW (-2.27%). Bayer's (BAY) (+1.95%) third quarter operating profit beat forecasts, with earnings before, interest, taxes and special items up 22% year-over-year to €798 million on in-line quarterly sales of €7.78 billion. The stock was boosted mainly by an upgrade to full-year healthcare margin forecasts.

In an interview with France's Les Echos, Gazprom's vice president, Alexander Medvedev, said his company is not negotiating to buy Centrica or RWE (+2.96%), but won't rule out anything. Deutsche Telekom (DT) (-1.17%) CEO Obermann plans to get rid of most of the group's executive board members, according to WirtschaftsWoche.

It is understood that state prosecutors want to talk to CEO Klaus Kleinfeld as part of a probe into suspected fraud at Siemens (SI)(-2.33%). Software AG (-1.72%) expects to make acquisitions in 2007, according to Saturday's edition of FAZ, which quoted CEO Karl-Heinz Streibich, without any details disclosed. Premiere (-0.8%) is in partnership talks with Redbull, according to Focus Magazine. Sueddeutsche Zeitung wrote that Zapf (+0.12%) is looking to move back into profit in 2007 after a cost-cutting program that includes job cuts.

Elsewhere: Spanish shares plunged as BBVA resumed trading lower. BBVA (-3.15%) took 55 points off the Ibex 35 index after news of a €3 billion capital increase to strengthen core capital over 6%. Meanwhile, Santander (-1.29%) is interested in buying SanPaolo-IMI's consumer credit unit Neos Banca, sources reportedly said.

Italian stocks fell further at mid-session. The dollar continued to cause pain to European exporters like Luxottica (-1.36%) and Bulgari (-1.42%).