European Indexes Fall As Rates Stay Steady

A roundup of Thursday's action on major European exchanges


The FTSE 100 closed well into the red, tracking losses on Wall Street as news of a home lender defaulting and US 4Q foreclosures hitting a record high hammered sentiment. The BoE held rates at 5.25%. Investors are predicting the next rate cut will come in May. On the trading floor, REUTERS (+0.34%) reported a strong set of FY results and said early indications for 2008 are encouraging despite the uncertain market environment and u/l revenue growth in 1Q08 should be around 9%. BRITISH AIRWAYS (-7.36%) said it expects revenue to increase by 4-4.5% in FY08/09, while fuel costs will jump by 20% to GBP2.5bn. INTERNATIONAL POWER (+6.65%) rallied after posting FY profit at the top end of forecasts. ARRIVA (-1.09%) stalled despite FY revenue ahead of forecasts as the company said profits were hit by fuel costs and the three UK rail bids. Miner KAZAKHMYS (-1.33%) missed FY forecasts but said long-term resources outlook was positive. COBHAM (+1.04%) reported a 12.9% rise in u/l profits. AGGREKO (unch) announced FY numbers in line with forecasts and said demand was extremely strong in International Power Projects. TAYLOR WIMPEY (+1.88%) said it anticipates a more difficult trading environment in the UK during 2008. CATLIN (+7.03%) got a boost from ahead-of-consensus FY results.


The CAC 40 (-1.65%) closed firmly lower, with Wall Street trading in the red. The US$ has reached new lows against the EUR and WTI was trading at records highs of c.US$104.61/bbl. The ECB held rates at 4.0%. Locally, CARREFOUR (+4.09%) posted FY07 net sales of EUR 82.148bn, up 6.8% and net income of EUR 2.299bn, up 1.4%. Expects 2008 sales growth of 6% to 8%. Separately, Bernard Arnault and Colony Capital said they will become Carrefour's leading shareholders, after members of the Halley family voted to scrap a pact that gives them control of more than 10% of the retail giant. Also reporting, ESSILOR (+0.97%) unveiled FY07 net profit up 11.6% to EUR 366.7m, better than expected. Market rumours had it that CREDIT AGRICOLE (-4.12%) could be in talks to buy Caja Madrid's 4.78% stake in Bankinter, according to Negocio. In the broader market, NATIXIS (-4.87%) reported 4Q net loss of EUR 900m (vs net profit of EUR 364m in 4Q06). Blue chip financials fell: SOCGEN (-4.74%), BNP PARIBAS (-3.27%), AXA (-2.9%). Belgian investor Albert Frere has taken his stake in LAFARGE (-0.64%) up to 20.04% from a previous stake of just more than 18%. AIR FRANCE-KLM (-5.93%) was hit by BA lowering its FY08 margin target on higher fuel costs.


Xetra-Dax (-1.38%) finished the penultimate day of the trading week firmly in the red, as Wall Street also traded much lower, amid new US$ lows against the euro and the Swiss franc. The ECB and the BoE both kept their interest rates steady, at 4.00% and 5.25% respectively. Of local note, E.ON's (+1.26%) FY07 adjusted EBIT of EUR 9.21bn was ahead of the consensus forecast. The power giant proposed a 1-3 share split and guided for 5-10% EBIT growth in 2008. DEUTSCHE POST's (+1.06%) 4Q EBIT including one-off effects came in higher than expected at EUR 660m. Quarterly revenues of EUR 16.97bn also topped forecasts. The company did not give more information regarding the future of POSTBANK (-2.09%), or any detailed plans on the loss-making US Express business. SALZGITTER (-1.07%) posted 2007 PTP of EUR 1.314bn, a touch above expectations, on sales of EUR 10.19bn, a bit lower than expected. It cautioned that it saw 2008 earnings in its steel business lower than in 2007. STADA's (+0.9%) dividend payment will be lifted by 15% as 2007 sales rose some 26% to EUR 1.57bn. EBIT came in 11% higher at EUR 187.8m. Earnings updates aside, BA's CEO disclosed an interest in bmi, the British airline in which LUFTHANSA (-3.47%) has a 30% stake. AIR BERLIN (+1.2%), meanwhile, saw its February passenger count rise 14.8% y/y, with capacity utilisation up 4.1% percentage points to 72.5%.


The AEX (-1.6%) closed firmly lower, with Wall Street trading in the red. The US$ has reached new lows against the EUR and WTI is at record highs of c.US$105.00/bbl. The ECB held rates at 4.0%.

Locally, financials continued to weigh on the AEX as AEGON (-5.71%) fell further. It reported underlying 4Q results somewhat better than expected, but the value of new business in 4Q was below expectations. Bear Stearns said there were no bad surprises on the asset side, but Aegon's high exposure to the US means that the shares will remain exposed to economic sentiment and the potential for weaker economic performance. In other earnings, AKZO NOBEL (+9.07%) outpeformed as it unveiled strong 4Q results, raising its dividend by 50% to EUR 1.80 and announcing that it will accelerate its earlier announced cash returns, starting with a EUR 3bn buyback by mid-March. AHOLD (+3.05%) posted better-than-expected 4Q net profit at EUR 262m. Its outlook was also better than expected and it has proposed paying its first dividend in five years. In the wider market, SMIT INTL (+3.46%) reported FY net results of EUR 105.6m, higher than expected. Away from earnings, DSM (-1.4%) has made an equity investment in the Dutch company IQ Therapeutics BV, which develops antibody-based products for biodefense and for the prevention and treatment of infectious diseases. IMTECH (+1.49%) is to expand in South Africa, Norway and Panama.


Milan ended Thursday's session firmly lower as Wall Street trades in the red after the US$ reached new lows against the EUR and WTI trades at record highs of US$104.56/bbl. Back in Milan, former Prime Minister Silvio Berlusconi said that ALITALIA (+3.71%) could be sold to Air France-KLM so long as it retained its Italian identity. On the earnings front, PIRELLI RE (-3.75%) has disclosed FY07 consolidated net income at EUR 151.1m, down 5% y/y. The real estate group has proposed a dividend of EUR 2.06/sh. TELECOM ITALIA (-3.7%) will report 4Q results later today. Citigroup thinks the focus will be on domestic fixed and mobile operations, the FCF generation of those units and the group's future strategy rather than the 4Q07 figures themselves. For LOTTOMATICA's (-1.12%) figures also due out later, Citi focuses on FY EBITDA, which is expected to reach EUR 690.6m. Says FY net income, which it forecasts at EUR 79m, will be affected by one-offs. Away from the results, ENEL (+0.53%) could plan to spin off its renewable energy assets into a separate group, according to MF. Italian mutual funds saw net outflows of EUR 7.5bn in February, according to Assogestioni. Said that shares in Italian asset managers such as MEDIOLANUM (-3.22%) and INTESA SANPAOLO (-2.43%) are sensitive to the data as inflows boost their income from fees.

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