European Indexes Slump

Markets ended solidly in the red amid a downturn on Wall Street

London: The FTSE 100 closed in the red Friday, hit by a slump on Wall Street. Equities were battered by disappointing figures from Google and Caterpillar, profit-taking and a 27bps interest rate hike by China. The US$ hit a 12-year low vs a basket of currencies on US subprime woes. Copper futures hit an 11-week high supported by strong demand after solid Chinese growth in 2Q. In the sector, BHP Billiton (-0.93%) will not be making a bid for US aluminum giant Alcoa, according to The Australian newspaper. Among individual gainers, Friends Provident (+4.03%) jumped on talk of bid interest from French insurer AXA and rumours of broker upgrade. Johnson Matthey (-0.98%) received a Citigroup target upgrade to GBP20 from GBP18. In M&A news, Delta Two, the Qatari investment fund, said it was considering a GBP6/sh bid for Sainsbury (+0.08%). Vodafone (-0.86%) CEO Arun Sarin pledged to release value from the US$50bn US j/v, Verizon Wireless, The Times wrote. Baugur confirmed it has no current intention to make an offer for Debenhams (-4.33%). In other news, Man Group (+0.08%) CEO Peter Clarke blamed investor fears of a credit crunch for its decision to cut as much as US$900m from the price of MF Global, the brokerage unit that it floated in New York yesterday, The Times reported.

Paris: The CAC 40 (-1.79%) closed Friday's session firmly in the red, below the 6,000 line as Wall Street trades broadly lower. Locally, market source said Merrill Lynch recommended playing PSA (+1.36%) through options as broker expects the stock to move sharply one way or the other in the next two months depending on what is delivered at PSA's September strategy plan. Arcelor Mittal (-0.65%) has reached a preliminary agreement to buy two steel tube businesses from Vallourec (-4.89%) for an undisclosed amount. Market sources said that this news cools takeover speculation surrounding Vallourec. Danone (-1.58%) faced profit taking after it gained earlier as Les Echos reported that if PepsiCo were willing to take over Danone it would have to pay a control premium of at least 30%, hence valuing the French group at c.EUR 43bn or c.EUR 83 per share, vs current valuation of EUR 30bn or EUR 57 per share, respectively. The Algerian govt opposes Nicolas Sarkozy's proposed tie up between GDF (-0.58%) and Sonatrach because it might prevent Sonatrach from dealing directly with its European clients, La Tribune reported. Elsewhere, Fleury Michon (+0.81%) posted 2Q sales of EUR 125m, up 9%, with 1H sales rising by 11% to EUR 244.4m. Bourbon (+2.00%) is to sell Les Abeilles port towage operations to Grupo Boluda for an undisclosed amount.

Frankfurt: The Xetra-Dax (-1.42%) closed solidly lower Friday as Wall Street traded lower after disappointing results from Google and Caterpillar. In the news: Aerospace company EADS (-0.93%) reported that Louis Gallois will become the sole CEO on 27 August. GPC Biotech (-34.19%) plummeted as an FDA panel will meet next week to discuss the satraplatin cancer drug after raising five issues with the application for the drug, also known as Orplatna. In auto news, traders noted rumours that Chinese group Brilliance is looking to buy a stake in BMW (-0.69%). VW (+0.21%) may split up its truck unit to add its heavy-truck factory in Resende, Brazil to a possible merged entity of MAN AG and Scania AB, according to Manager Magazin. In M&A news, Norddeutsche (+0.54%) will consider buying A-TEC Industries' copper refinery after completing a merger with Cumerio, the company's CEO reportedly said in a newspaper interview. A German politician urges Siemens (-2.48%) to sell its automotive unit VDO to Continental (-0.87%) in an interview with a local radio. On the broker front, Credit Suisse initiated coverage of ADVA (+2.27%) with outperform. Lehman Brothers reinstated E.On (-0.24%) coverage with overweight.

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