European Indexes Fall

Worries about U.S. subprime lenders weighed in Europe Tuesday

From Standard & Poor's European MarketScope

European indexes closed lower. US markets were trading in the red on subprime woes and weaker February retail sales data. A rising JPY added to the pressure. Oil rebounded above US$59/bl.

UK: The FTSE 100 index closed lower. Banking was the worst performing sector. HSBC (-0.82%) and other banks are struggling to force small mortgage lenders to buy back the high-risk loans they bought in 2005 and 2006, the WSJ wrote. Sentiment was also hit on rumors of a UK hedge fund going under. Man Group (-3.24%) slid. Among the movers, Alliance Boots (+2.01%) rose on hopes that after rejecting the £10/sh bid from executive deputy chairman Stefano Pessina and KKR as too low, the private equity firm will come up with an extra 50p to 70p a share. Cadbury Schweppes (+9.63%) surged after Nelson Peltz confirmed that he holds a stake. ICI (-0.66%) gave up gains on late rumors that Akzo Nobel was looking at Clariant.

In company news, SABMiller (-5.55%) lost fizz after Heineken ended the Amstel license. Antofagasta (-1.05%) drilled out an 86% rise in fiscal pretax profit, catalyzed by record copper prices in 2006. The miner expects the copper and molybdenum markets to be above historical levels in 2007, but added that the exceptional average copper price of 2006 might not be repeated. Music and books retailer HMV (-15.55%) said fiscal profits will be below market expectations and is to launch a new store format.

France: The CAC 40 index (-1.15%) closed firmly in the red. Banks were affected by loans concerns: BNP Paribas (-1.74%), SocGen (-1.65%) and Credit Agricole (-1.82%) fell, together wiping 14.3pts from the blue chip index. The former is to acquire a stake in Indian company Geojit Financial Services Ltd. The JPY/US$ drama hit Total (TOT) (-0.68%). Sanofi Aventis (SNY) (-1%) has been hit by French approval for Indian pharma player Lupin to market the generic version of Sanofi antibiotic Orelox from August 2007.

Lagardere (-3.56%) tumbled after posting lackluster fiscal 2006 results with net income of €291 million vs. €670 million in 2005, a touch below expectations. In related news, Arnaud Lagardere has said he sees no need for a capital increase at EADS (+0.36%) - a comment seemingly aimed at politicians looking to take a bigger role in Airbus.

GDF (-1.51%) posted in-line fiscal 2006 results with net income - group share of €2.3 billion, +29%; sales of €27.642 billion, +21%. Euronext (-1.21%) reported fiscal 2006 net profit of €361.8 million, up 50.8%, that some analysts felt was a touch weak. Elsewhere, Michelin (-2.15%) will sell as much as €700 million in bonds convertible into shares.

Germany: The Xetra-Dax index (-0.79%) finished Tuesday's session firmly in the red. The ZEW survey, dipped to 69.2 from 70.9 in February. Commerzbank (-2.86%) closed as one of the worst performers on the blue chips index after Citigroup dashed investor hopes by saying it was currently not interested in buying a large western European bank.

On the earnings front, MTU (-1.34%) fell on profit-taking. It reported 2006 sales of €2.42 billion and EBITDA of €318.2 million, both marginally better than consensus expectations. Postbank (-1.21%) slipped further after CEO, Wulf von Schimmelmann, handed in his resignation, to be replaced by Wolfgang Klein on July 1. Fraport (-2.01%) achieved new record traffic figures, with February passenger numbers across the board up 8.6% year-over-year.

DCX's (DCX) (-1.05%) Chrysler met with several potential buyers in anticipation of offers by month's end, wrote The WSJ. The same newspaper reported that VW's (-0.98%) Audi unit confirmed plans to build a new compact model in Belgium and take full management of the Brussels plant. India's Ranbaxy and Cipla were in the race for Merck's (+0.02%) generic drugs unit, while Dr Reddy's didn't submit a bid, according to the Economic Times.

Elsewhere: Piazza Affari closed trading south of the gain line, as investors focused sharply on Pirelli (+6.28%)and Telecom Italia (TI) (+0.61%).

The AEX index closed markedly lower along with other European indexes.

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