European Indexes Fall

Wall Street weighed on European stocks Tuesday morning

From Standard & Poor's European MarketScope

European indexes lost ground Tuesday morning. US futures suggested that Wall Street will open lower, weighed down by disappointing license sales at Oracle (ORCL). The focus was also on US PPI data, seen up 0.5% m/m, but down 0.8% y/y.

UK: The FTSE 100 index remained broadly lower at mid-session, with breadth 8-2 negative. Miners were weaker, with Xstrata (-2.13%) affected by a strike in Chile and Vedanta (-4.73%) hit by a two-week shutdown in Zambia. BT (BT) (-2.67%) fell further after disclosing a larger-than-expected pension deficit. Sector peer Vodafone (VOD) (-0.45%) announced that it has agreed to sell its 25% interest in Swisscom Mobile to Swisscom (SCM) for a cash consideration of CHF4.25 billion.

ITV (-0.81%) announced that ad revenues in its main channel ITV1 were down 12.5% this year. Glaxo (GSK) (-0.50%) gave up early gains. The pharma giant announced a Humax CD-20 deal with Genmab, taking a stake in the Nordic group, too.

In the broader market, Britvic (+6.78%) jumped on news that Axa (AXA) sold a 9.2% stake at £2.90/share after the close last night, raising the possibility of a takeover bid. Wood Group (+5.70%) traded higher after announcing that EBITA for the year will be ahead of market expectations. Regus (+2.83%) gained on strong 11M sales and the announcement that it will pay a dividend. Wilson Bowden (+0.19%) and Cookson (-0.24%) said trading is in line with expectations.


The CAC 40 index (-0.88%) pared earlier losses but remained broadly in the red with 19-1 negative breadth. Alcatel-Lucent (ALU) (-1.73%) led the losers. Lehman Brothers said many of the softer data points in the sector indicated weakness in the company, namely muted DSL spending at the RBOCs, primarily key customers AT&T (T) and BellSouth (BLS), weakness at EMS partner Celestica (CLS), and general VDSL weakness.

Total (TOT) (-1.09%) was hit by lower oil prices as potential mild weather will curb heating demand in the US. Oil related Maurel & Prom (-6.36%) tumbled as its Profond-1D exploration failed to find sandstone reservoir Vandji. The Suez (SZE) (-1.10%) and GdF (-0.71%) merger talks may collapse over difficulties involved in trying to persuade their shareholders to vote on the €80 billion deal on time, The Times reported.

Axa (AXA) (-1.07%) has agreed to buy the 49% it doesn't already own in Axa Assurance Maroc, said Les Echos. DaimlerChrysler's (DCX) shares in EADS (-0.53%) may be bought by private banks, according to Handelsblatt. HSBC downgraded France Telecom (FTE) (-0.33%) to underweight from neutral, trimming the target to €18.50 from €19.00. The broker said the company has the right strategy but no growth. ING upped its EDF (+0.72%) target to €53.

Germany: The Xetra-Dax index (-0.64%) traded below breakeven at mid-session Tuesday. The Ifo business climate survey came in ahead of expectations, at 108.7 against a forecast 107.5 and compared to 106.8 in November. Overnight, SAP's (SAP) (-0.88%) arch rival Oracle reported a 21% rise in second quarter profit, but sales of new software application licenses were weaker than market expectations, causing the stock to slide some 3%.

Talking to the WSJ, MAN's (-0.14%) CEO, Hakan Samuelsson, attempted to soften the tone of his group's US$13 billion bid for Swedish rival Scania by saying any deal would be a merger of equals. Peter Diesch will be appointed as Karstadt's (-1.98%) new CFO, WirtschaftsWoche said of the current finance head of Linde (-1.26%).

On the earnings front, Norddeutsche Affinerie (-1.06%) posted fiscal 2005/06 pretax profit shy of expectations, coming in at €103 million, up from €90 million last time. The group proposed a dividend payment of €1.05 per share, compared to €1.00 last time. Key on the broker front, Credit Suisse downgraded Salzgitter (-2.79%) to neutral, with the steel group close to the broker's OTP value of €100. Deutz (-1.72%) saw both UBS and HSBC downgrade it to neutral.

Elsewhere: Nordic bourses continued to trade lower across the board. While off intra-day lows, the SMI remained below breakeven as well.

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