European Indexes Fall
London: The FTSE 100 closed deep in the red, tracking Wall Street. Sentiment took a hit on Home Depot's (HD) disappointing outlook, coupled with profit warnings from other US companies and S&P Credit Ratings saying it may cut US$12 billion worth of bonds backed by subprime loans. The pound spiked to a 26-year high vs. the greenback. Cable was at US$2.0246. However, among individual bright spots Unilever (UN) and Marks & Spencer were in focus.
BP (BP) (+0.65%) gained after a report by the IEA suggesting the world oil markets were becoming increasingly tight beyond 2010, with OPEC spare capacity declining to minimal levels by 2012. Marks & Spencer (+1.26%) gained after reporting better-than-expected first quarter figures. Unilever (+1.98%) rallied on speculation the merger between Numico and Danone could trigger the move of Numico's CEO Jan Bennink and CFO Jean-Marc Huet towards the Anglo-Dutch group. Traders said this would be a big positive, as Unilever needs good management.
On the downside, miners consolidated recent gains despite target upgrades across the board from UBS. BHP Billiton (BHP) (-3.69%) was also affected by reports it has begun talks with private equity firms over a possible US$40 billion takeover of Alcoa (AA).
In the broader market, transport group Arriva (+7.92%) steamed ahead after winning the new Cross Country rail franchise.
Paris: The CAC 40 (-1.40%) closed the session deep into the red, mirroring all the other European markets and Wall Street. Bourses were hit as S&P Ratings placed its ratings on US$12 billion of rated securities backed by subprime mortgages on CreditWatch with negative implications, citing expectations that losses will continue.
In Paris, financials SocGen (-2.11%), BNP Paribas (-1.69%), and AXA (AXA) (-2.26%) erased a total of 21 index points. Conversely, Air Liquide (+0.64%) outperformed on a rumor KKR is to bid for the French group. Danone (DA) (-1.77%) has made a cash offer of €12.3 billion for Dutch group Numico.
French president Nicolas Sarkozy was in Algeria today and said a partnership between GDF (-1.48%) and Sonatrach may be agreed by November. Sarkozy has talked up this scenario recently, remaining undeclared on a GDF-Suez (-1.87%) fusion.
The future of Louis Gallois at EADS (-2.50%) hangs in the balance as shareholders in EADS attempt to hammer out a compromise over a streamlined management structure, the FT wrote. Bouygues's (-2.03%) telecom unit wants to offer broadband internet access to customers in France, Les Echos reported.
Elsewhere, Virbac (-0.16%) announced first half 2007 net sales of €215.9 million, up 12.3%.
Frankfurt: The Xetra-Dax (-1.29%) closed in negative territory after Home Depot and Sears (SHLD) cut their outlooks reflecting a subdued housing market. Meanwhile, S&P Ratings has put US$12 billion worth of subprime mortgage-backed securities on creditwatch negative.
Of local note, Infineon (+0.23%) outperformed as Bear Stearns raised its target price for the world's largest chipmaker Intel (INTC), based on solid industry trends and stable pricing. Kloeckner (-0.69%) may consider a large acquisition, possibly of up to €750 million, this year, the CFO told FAZ newspaper. Heidelzement (-0.99%) has apparently received offers from private equity firms such as Blackstone (BX) for its building material unit Maxit, Dow Jones reported.
Insurers Munich Re (-1.15%), Swiss Re and UK-based Lloyd's were in talks with the State Bank of India for partnering its general insurance foray, according to the Business Standard website.
Among banks, Deutsche Bank (-2.17%) sells its remaining 13.2% in Deutsche Beteiligungsbank, according to Boersen Zeitung.
On the broker front, UBS lifted its target price on DaimlerChrysler (DCX) (-0.74%) and raised truck, van and bus forecasts for fiscal 2008 and fiscal 2009, keeps a buy recommendation. The broker also upgraded Allianz (AZ) (-0.79%) to buy from neutral and downgraded Solarworld (-2.17%) to neutral from buy.