Euroshares down tracing Wall St lofsses and cautious trading on hedge fund woes
Leading European exchanges lost ground during today's morning fsession factoring in heavy losses on Wall Street last Friday and with investors in cautious trading on the back of concerns over two Bear Stearns
hedge funds and the US subprime mortgage market.
At 12.22 pm, the STOXX 50 fell 0.51 pct or 19.91 points to 3,902.93 as the STOXX 200 retreated 0.57 pct or 2.23 points to 390.20.
Looking ahead, Wall Street is set to kick off the week with gains, helped by stabilizing bond yields and a fall in oil prices, with General Motors set to move higher on a Goldman Sachs upgrade to 'buy'.
According to spread bettors IG Index, the Dow Jones Industrial Average is expected to open up 55 points at 13,415. Separately, S&P 500 futures rose 0.80 point to 1,521.30 while Nasdaq 100 futures were off 4 points at 1,952.
Back in Europe, traders were talking about a standard corrective move by the market in a week loaded with economic data and following heavfy losses on Wall Street last Friday.
"Of course we are looking at rather weak guiding from the US and that is now traced here," one trader said.
He also said there was a thin newsflow this morning adding to investors' cautious trading pattern.
Another Frankfurt-based trader noted that European equities were driven lower by the large financial stocks, while adding that he believes the general sentiment to simply present a standard correction.
"There are concerns about a possible tilt in hedge funds," he said, adding the US subprime mortgage sector was still a major concern.
"As long as the situation hasn't been resolved, it will remain a major topic. We still don't know what dimension this could take".
The Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund and the High Grade Structured Credit Strategies Fund have slumped this year because some of their assets were pegged to the mortgage market. Borrowers with weaker credit have been defaulting on subprime loans, and that has caused instability throughout the market.
Financial stocks are also under pressure from persistent interest rate fears ahead of Thursday's announcement of the Federal Reserve, while economists polled by Thomson Financial News expect the US Fed to leave rates unchanged at 5.25 pct.
Deutsche Bank lost 2.34 pct, while UBS fell 1.46 pct and Italy's Unicredito dropped 0.86 pct, Commerzbank retreated by 1.71 pct.
Also in the banking sector, Banco Santander Central Hispano was off earlier losses --down 0.59 pct--- after it said it will call an extraordinary general meeting to seek shareholders' approval for a 4 bln eur capital hike and 5 bln
eur convertible bond issue to finance its part of the proposed acquisition of ABN Amro Holdings NV.
The Spanish bank is part of Royal Bank of Scotland-led consortium locked in a takeover battle with Barclays for the Dutch bank. BNP Paribas chief executive Baudouin Prot has reiterated his opposition to a merger with French peer Societe Generale, stressing their activities are too similar.
"In the past 10 years, the two companies have continuously developed in overlapping areas," he said in an interview with the weekend edition of Le Figaro, citing derivatives in particular.
BNP Paribas shares fell 1.19 pct while shares in Societe Generale dropped 1.20 pct and Barclays retreated 0.41 pct.
Meanwhile, on the merger and acquisitions front, Gas Natural added 2.69 pct midday, on the back of report on the El Confidencial website that Suez --which fell 0.93 pct-- could raise its stake to 24.9 pct from currently 10 pct.
A dealer at a leading international investment bank said: "Suez' interest is supporting Gas Natural's share price, with people continuing to speculate over a three-way tie-up between Suez, Gas Natural and Iberdrola."
A spokeswoman for Thomson Financial News said the company has no short-term plan to raise its Gas Natural stake (beyond the 11.3 pct target announced last month), but does not rule out an increase in the future "if the opportunity arises".
French Groupe Danone -- up 2.14 pct -- was also subject to renewed takeover talk with dealers pointing towards articles in weekly Le Journal des Finances and Investir.
In its analysis of the stock, Le Journal des Finances (JDF) said some investors continue to speculate about a takeover move from the likes of PepsiCo, Coca-Cola or Kraft Foods -- now that it has been spun off by Altria -- with the financial weekly estimating a bid for Danone would be worth 75-80 eur per share.
However, JDF cautioned that the recent drop in Danone's share price is not enough to give weight to such speculation.
Over in Belgium, shares in Cumerio NV surged after Norddeutsche Affinerie AG said it will offer 30 eur a share cash for the copper manufacturer as part of their planned merger to form Europe's leading copper maker and processing group.
Cumerio gained 18.80 pct at last check, while Norddeutsche Affinerie lost 4.67 pct.
Copper market peer Hagemeyer also benefitted from the news, adding 1.63 pct.
Telecommunications giant France Telecom saw its stock take a 2.62 pct dip after the French government said it will sell a 5-7 pct stake and use the money to reduce the state debt, Economy Minister Christine Lagarde said in a statement late yesterday.
The sale of 5 pct of the company's capital would bring in some 2.7 bln eur, based on Friday's closing price of around 21 eur per share.
Staying in M&A, shares in the London Stock Exchange Group was off earlier lows, down 0.44 pct, with investors digesting Saturday's confirmation that LSE is buying Milan's Borsa Italiana for 1.6 bln eur in shares.
Many market observers have viewed the tie-up as an attempt by the LSE to fend off any thoughts the Nasdaq Stock Market may have of making a fresh bid for the London Stock Exchange.
Credit Suisse reiterated its 'underweight' stance for the stock with a target of 1,200 pence.
The broker said it believed the cost synergy target should be comfortably achieved but that revenue synergies are less tangible.