European Markets End Mixed

A rundown of Tuesday's action on major European stock exchanges


The FTSE 100 (-3.43%) finished the day thoroughly in the red, but came off lows after having traded well below the 5000 points mark earlier, as CNBC reported that the US government had entered talks to save AIG. Meanwhile, Goldman's 3Q results, while down c.70% y/y, were better than expected. WTI crude slipped below US$91.81, hurting heavyweight oil stocks but lifting travel and airlines shares. The FOMC will make its announcement after the European close. At home, persistent funding fears kept HBOS (-21.72%) depressed. RBS (-10.17%) also suffered. BARCLAYS (-2.53%) confirmed it is still interested in some of Lehman's businesses. Miners tracked lower metal prices. BHP (-4.51%), XSTRATA (-7.43%), ANGLO AMERICAN (-6.27%), RIO (-7.68%) were all sharply lower. TULLOW OIL (-2.02%) said it found no oil in a well in India. Moody's downgraded BRADFORD & BINGLEY's (-4.76%) long-term bank deposit and senior unsecured debt ratings to Baa3 from Baa1. DEBENHAMS (-1.75%) said FY LFL sales fell 0.9% but gross transaction value rose 1.3%. Adecco said it won't make an offer for MICHAEL PAGE (-22.3%). ASHMORE (-7.99%) reported a 49% jump in FY profits, with AuM up 19%. BERKELEY GROUP (-2.04%) said 1H and FY performances were in line with board expectations. Finally, PARAGON (+0.93%) rejected a GBP1.25 per share offer.


The CAC 40 (-1.96%) closed the session broadly lower. The financial sector remained in the doldrums: SOCGEN (-4.72%), CREDIT AGRICOLE (-5.18%), AXA (-2.90%). BNP PARIBAS (-3.05%) said it has a 'manageable' exposure to Lehman Brothers. The group made a bank loan of US$250m to Lehman, according to bankruptcy filings. NATIXIS (-16.11%) said it has EUR 21m of net risk to Lehman. TOTAL (-2.71%) weighed heavily as oil price fell to c.US$91.90 a barrel on fears that pain on Wall Street may weaken the global economy and cut demand for fuels and raw materials. Conversely, MICHELIN (+0.81%) gained. RENAULT's (-3.22%) global August sales fell 5.8%. PSA's (-2.82%) European August sales fell 18.7%. Various market sources said today's rumor that LAFARGE (+1.02%) and Swiss Holcim may merge is very unlikely. However, traders said that yesterday's rumors that a foreign investor could be building a stake in Holcim may boost the sector. FRANCE TELECOM (+4.22%) is turning its attention back to Africa, with a new focus on making acquisitions in Anglophone countries, the FT said. In broker news, RBS downgraded VEOLIA ENVIRONNEMENT (-4.02%) to hold.


Xetra-Dax (-1.63%) closed firmly below breakeven. Uncertainty spooked investors amid the collapse of Lehman Brothers and as insurance behemoth AIG came under renewed pressure because rating agencies downgraded its debt. Locally, VW (+9.42%) sped ahead as PORSCHE (-1.75%) said it holds 35.14% of the voting rights. MUNICH RE (-3.65%) said its exposure to Lehman is EUR 350m and it defined its exposure to AIG as 'not significant'. The reinsurer reassured that its buyback program is unaffected by recent market developments. DEUTSCHE BANK (-4.57%) is among those European banking stocks best avoided because it may be a counterparty to bankrupt Lehman Brothers, said JPM. In other news: BAYER (+0.66%) was in focus on renewed speculation that Pfizer is interested. A bid of EUR 65 - EUR 67/share is thought to be on the table. Schaeffler's extended offer for CONTINENTAL (-4.11%) ends at midnight tonight. Some institutional investors in DAIMLER (-0.67%) are in favor of a sale of the truck business, but would prefer the auto giant wait before making such a move, according to Handelsblatt. DEUTSCHE POST (-1.52%) refuted media reports of plans it supposedly wants to sell DHL Express in the US. Broker-wise, SAP (+3.8%) was marked higher on an upgrade to outperform at Credit Suisse.


The AEX (-3.59%) finished the day with considerable losses but came off lows. After the European close, all eyes will be on the highly awaited FOMC meeting with pundits now expecting a 25bps cut. Oil declined to US$91.92/bbl. ING (-8.75%), FORTIS (-10.93%) and AEGON (-7.20%) continued to suffer after announcing their exposure to the Lehman meltdown.

Fortis was also reported to need more time to sell a stake in its unit Fortis Bank Polska SA. On a positive note, Dutch retail sales surged 5.4% in July, helped by the fall of days in July 08. SCHUITEMA (+4.94%) and BETER BED (+0.53%) outperformed. SUPER DE BOER (-1.2%) unveiled LFL 3Q sales up 4.2% y/y. On the M&A front, SMIT INT (-0.87%) declined to enter into talks with BOSKALIS (-0.53%) regarding its suggested EUR 62.50/sh offer. Elsewhere, after Adecco ruled out a bid for Michael Page, investors seem to see USG PEOPLE (+3.71%) and BRUNEL (+4.3%) as possible alternatives. WOLTERS KLUWER (-1.71%) also announced a minor acquisition: Addison Software and Service GmbH, a provider of software solutions for the German tax market.


Nordic bourses narrowed losses at the end of the session. In the Nordic region, HUSQVARNA (-4.69%) issued a profit warning, saying 3Q operating income will be substantially lower than in the previous year. The group now expects 3Q operating income to amount to c.SEK300m (SEK553m). In financials, as a result of Lehman's downgall STOREBRAND's (-4.11%) Livsforsikring has booked a loss of NOK72m. Further in the sector, Goldman removed SWEDBANK (-7.91%) from its conviction sell list, however keeps its sell recommendation. Moving on, SEADRILL (-3.41%)and Ship Finance International have agreed on a combined sale and leaseback arrangement whereby Seadrill will sell two ultra-deepwater semi-submersible rigs for US$1.7bn, and at the same time lease the units for a 15-year period. In pharma news, ASTRAZENECA (-2.47%) and Targacept said results from the Phase IIb clinical trial of AZD3480 (TC-1734) in mild to moderate Alzheimer's disease were inconclusive. Said in the Sirocco trial, neither the active comparator donepezil nor AZD3480 met the trial's criteria for statistical significance.


Spanish shares managed to finish Tuesday's session flat to higher. Locally, SANTANDER (+0.19%) and BBVA (+0.09%) continued to suffer from the fallout of the weekend's dramatic events on Wall Street. SANTANDER said it has EUR 11m direct exposure to Lehman Brothers and EUR 44.6m via derivatives. In other news, FCC (+1.22%) and BANCO POPULAR (+5.46%) moved up, with traders attributing both gains to short covering in the wake of Lehman's collapse. Elsewhere, IBERDROLA (-1.81%) is considering making a non-binding offer for Portuguese wind farm assets owned by Babcock & Brown, Cinco Dias reported. ENDESA (-4.14%) plans to bid for Irish group Viridian's energy assets on 6 October, Negocio reported. Spanish energy regulator CNE is proposing an increase in electricity prices of between 3% and 10% from October, according to Expansion. In broker action, ING cut TELEFONICA's (+0.18%) target price to EUR 18 from EUR 20. Cheuvreux cut GAS NATURAL's (-4.84%) target price to EUR 31.10 from EUR 39.60.

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