Banks Lead Europe Steeply Lower

Elena
14 Mar, 2007
New York City

European stocks finished sharply lower on Wednesday, led by declines for banking stocks as U.S. worries about subprime-mortgage losses spread through the sector. Among firms in focus, Deutsche Bank dropped 5.1%, Credit Suisse lost 4.3% and UBS shed 4.3%. Insurers and fund managers were also notable losers. France''s AXA slid 5.1%, while U.K. Man Group dropped 4%. The French CAC 40 tumbled 2.5%, the German DAX 30 dropped 2.7%, and the U.K.''s FTSE 100 slid 2.6%.

[R]1:00PM NY European markets closed sharply lower, led by banking stocks.[/R]
European stocks finished sharply lower on Wednesday, led by declines for banking stocks as U.S. worries about subprime-mortgage losses spread through the sector. Falling metals prices added to the pressure, dragging resource stocks down. Among firms in focus, European banks involved in warehousing considerably dropped. Shares in Deutsche Bank dropped 5.1%, Credit Suisse lost 4.3% and UBS shed 4.3%. European banks with a U.S. lending business also deeclined. Shares of Royal Bank of Scotland Group slipped 4.5% and BNP Paribas gave up 3.5%. Insurers and fund managers were also notable losers. France''s AXA slid 5.1% in Paris, while U.K. hedge fund manager Man Group dropped 4% in London. The French CAC 40 tumbled 2.5% at 5,296.22, the German DAX 30 dropped 2.7% at 6,447.70 and the U.K.''s FTSE 100 slid 2.6% at 6,000.70.


[R]9:45AM Wall Street opened mixed, helped by stronger dollar.[/R]
Wall Street opened mixed on Wednesday, gaining some ground after the recent sell-off. The market sentiment was boosted by strengthening dollar which rose vs. the yen on the back of narrower current account deficit. However, there was more evidence about the fallout in the mortgage lender market. H&R Block ((HRB)) slid 2.4% after it warned that the meltdown increased its quarterly losses. Technology stocks opened broadly higher, pushing the tech-heavy Nasdaq higher. Qualcomm Inc. ((QCOM)) rose 2.7% as it raised its quarterly financial forecast. In contrast, Juniper Networks ((JNPR)) fell more than 2% after the company announced its chief financial officer resigned. Computer-memory chipmakers Micron Technology Inc. ((MU)) rose 1% and Qimonda AG ((QI)) rose 2%, lifted by upgrades from Citigroup, which boosted both companies to a buy. In the first minutes of trading, the Dow Jones industrial average rose 40.38, or 0.33%, to 12,116.34. The Standard & Poor''s 500 index advanced 5.13, or 0.37%, to 1,383.08, and the Nasdaq composite index rose 6.94, or 0.30%, to 2,357.51

[R]9:30AM London equities trade down Wednesday with banks hurt the most.[/R]
The UK market was lower on Wednesday. The FTSE 100 was down more than 100 points, or 1.4%, to 6,060.2 in morning trade.

Advancers

Of the few advancers, most were from the retail sector. Talks that a private equity group was considering a bid for Kingfisher sent its shares 4.4% higher on extremely high volumes. Also fresh reports that the private equity consortium eyeing J Sainsbury was about to put its offer forward sent the grocer 1.3% higher.

Robust same-store sales growth at Argos made parent company, Home Retail Group, raise full-year guidance and sent its shares 3.9% higher. The other advancers included Gallaher, the tobacco group, up 0.1%.

PartyGaming, up 10.5%, was one of only a few mid-cap gainers lifted by talk that the Democrats in Congress could reverse the US ban on online gambling

Decliners

The biggest decliner on the market was HBOS, the mortgage lender, which was down 4 %, although the decline was worsened by the stock moving ex-dividend. Of the other banks, Royal Bank of Scotland was 3.6% lower and Barclays lost 2.9%.

Man Group, the listed hedge fund, dipped 4.2% while Amvescap, the fund manager with a high exposure to US markets, was 2.9% lower and venture capital group 3i was down 2.8% as investors once more felt less ready to risk. The mining sector was also badly hit, with Anglo American down 3.4% and Lonmin off 3.3%.


[R]9:00AM U.S. stock futures pointed slightly lower, despite a lower-than-expected rise in import prices.[/R]
U.S. stock futures were indicating a slightly weak opening, as concerns over the troubled sub-prime mortgage business continued to weigh on global markets. Disappointing results from General Motors and Lehman Bros. also generated negative mood, helping to offset a smaller-than-expected rise in import prices. Import prices rose 0.2% in February, below expectations of a 0.7% gain. Excluding fuels, prices declined 0.2%, the biggest drop since July 2005. Among pre-market highlights, General Motors ((GM)) said it swung to profit in Q4, earning $950 million on revenue of $51.2 billion. Earnings excluding non-recurring items were 32 cents a share, well off the average analyst estimates of earnings of $1.19 a share. It also announced it is refunding $1 billion to GMAC, due to losses at its residential mortgage business. The stock dropped 2.5% in pre-market trading.

Lehman Brothers ((LEH)) reported fiscal Q1 results a day after its peer Goldman Sachs posted strong financial results. The company reported earnings increase to $1.15 billion, or $1.96 a share, from $1.09 billion, or $1.83 a share, a year earlier, coming in line with expectations. One off the companies badly affected by the subprime jitters, Accredited Home Lenders ((LEND)) rallied 21% to $4.76 in the pre-open, rebounding from a steep drop of 65% on Tuesday. Among mortgage lenders, NovaStar Financial ((NFI)) tacked on 2% ahead of the open and Countrywide Financial ((CFC)) climbed 2.2%. S&P 500 futures slipped 1.70 points to 1,390.20 and Nasdaq 100 futures gave up 1.25 points to 1,743.00. Dow industrial futures slipped 25 points to 12,164.


[R]8:00AM NY-7:00PM Mumbai Sensex tumbles 453 points on funds selling.[/R]
The Sensex on BSE closed 453.36 points lower, or 3.49%, at 12,529.62. The market-breadth was negative as there were more than two decliners for every advancer. For 740 stocks that advanced on BSE, 1,772 declined and 66 remained unchanged. Of the 30 stocks in the Sensex, only two advanced and 28 declined. The turnover on BSE was Rs 4,284 crore, compared with Rs 4,193.74 crore on Tuesday. The turnover on NSE was Rs 8,670.09 crore, higher than Rs 8,132.81 on Tuesday.

Economic news

The production of six core industries moved up 8.7% in January 2007 when compared with 8.2% in January 2006. However, supply side limits continued to affect the cement industry. The six industries include crude petroleum, petroleum refinery products and electricity generation.

The Steel Ministry said it was concerned over the increase in iron ore exports, which could pose a serious threat to the growth of domestic industry. From 41 million tonnes in 2001-02, iron ore exports had more than doubled to 100 million tonnes by latest estimates.

Arcelor-Mittal is a favorite to buy the assets of Sesa Goa, the largest private miner in India. Arcelor-Mittal is a front-runner with a bid of Rs 2,050 a share. Other prominent contenders such as JSW Steel and CVRD earlier dropped out on high valuations. Reportedly, companies like Vedanta Resources and Essel Mining might also be in the race.

Trading highlights

MindTree was the most active stock with a turnover of Rs 824 crore followed by Parsvnath and Tech Mahindra.

Advancers

Bajaj Auto rose 0.4% to Rs 2,529.30, off the session low of Rs 2,451.05 on strong 1.4 lakh shares traded on BSE. Gujarat Ambuja was slightly up 0.2% at Rs 106.15. Cement large-caps pared losses. Volumes in the stock were considerable, at 27.6 lakh shares on BSE.

Decliners

Banks were heavily hit. ICICI Bank led the decline with a drop of over 5% to Rs 830. State Bank of India lost 3.7% to Rs 944.10 and HDFC Bank lost 2.6% to Rs 934. Telecoms were also down. Bharti Airtel slumped 4.7% to Rs 729. Reliance Communications dropped almost 4.4% to Rs 398.5.

IT large-caps were under severe selling pressure. Wipro dropped 4.6% to Rs 555., while Infosys shed 4.1% to Rs 2,019 and TCS lost 4% to Rs 1,213.5. Other prominent decliners included ITC slipping over 4% to Rs 143 and BHEL down 4.1% at Rs 2,030.

Index heavy Reliance Industries dropped 3% to Rs 1,285. The Reliance group is in talks with French retail major Carrefour as also with other global players for acquiring controlling stake to reach out to international consumers with its basket of Indian food produce.


[R]6:30AM European markets fall in the wake of global market weakness.[/R]
European markets declined in early trade on Wednesday. The French CAC 40 index lost 1.7% at 5,343.22, the German DAX 30 index gave up 1.6% at 6,520.32 and the U.K. FTSE 100 index fell 1.3% at 6,081.20.

Advancers

Supermarket operator Carrefour was in focus, adding 2.7% as the only advancer on the main CAC 40 index after it was upgraded to overweight from equal-weight at Morgan Stanley. Stagecoach Group was another gainer, putting up 2% after it announced plans to return 700 million pounds, or $1.35 billion to shareholders and said its profit for the year will be at the top end of expectations.

Decliners

Banks providing lending facilities against a pool of mortgage loans were severely hit. Shares in Deutsche Bank dropped 3.4%, Credit Suisse lost 2.8% and UBS shed 2.4%. European banks with a U.S. lending business also fell. Shares in Royal Bank of Scotland Group which owns Citizens Financial Group, dropped 3.2% and BNP Paribas gave up 2.7%.

Insurers and fund managers were also hit, trading lower as the value of their investment portfolios was seen falling. France AXA stock fell 2.9% in Paris and shares in U.K. hedge fund manager Man Group dropped 4.5% in London.

Oil and gold

Crude oil was little changed before a report today that''s expected to show U.S. gasoline stockpiles fell for a fifth week as refineries shut for maintenance and repairs. Crude oil for April delivery rose 1 cent, or 0.02%, to $57.94 a barrel in electronic trading on the New York Mercantile Exchange, in early trade in London. Brent crude for April settlement fell 10 cents to $60.80 a barrel on the London-based ICE Futures exchange.

Gold fell to a one-week low on speculation slowing U.S. economic growth will stall demand for the precious metal as a hedge against inflation. Gold for immediate delivery declined $3.40, or 0.5 percent, to $640.40 an ounce at 10:48 a.m. London time.

Currencies

The euro dipped against the dollar on Wednesday on growing concern that loose lending practices in the United States could be felt worldwide. The euro bought $1.3190 in afternoon European trading, down nominally from $1.3196 in New York late Tuesday. The British pound fell to $1.9233 from $1.9303 as traders waited for that country latest unemployment information. The dollar also dropped to 116.10 Japanese yen from 116.52 yen.