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Bourses bow to profit takers
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January 11, 1999: 1:19 p.m. ET
Early gains in Europe disappear as dollar worries encourage bout of selling
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LONDON (CNNfn) - European investors stepped back from pushing indexes to new highs Monday, as the weak dollar encouraged a bout of profit taking.
Growing concern of an economic crisis in Brazil, President Clinton's impeachment process and their effects on the U.S. currency forced investors to bale out of export-related stocks.
The dollar touched a 28 month low against the yen in European trading, and investors saw this as an opportunity to pocket some of their gains from the markets' recent strength.
A lackluster opening on Wall Street added to the downbeat mood in Europe.
The major European indexes opened in a positive tone, but sellers soon stepped in to wipe out the early gains.
In London, the FTSE 100 index slipped 1 percent to close at 6,085.0, after posting a lifetime high of 6,195.6 Friday.
Frankfurt's Xetra Dax turned round sharply after racing into an early 2 percent gain. By the close the blue-chip index was 2 percent lower, down 104 points to 5,266.47.
There was a similar story in Zurich, where the blue-chip SMI slipped 2.2 percent, or 169 points, to end the day at 7,464.4. In Paris, the CAC 40 eased 1 percent to 4,201.90.
The London market was dominated by an enormous deal in the tobacco sector. British American Tobacco (BATS) announced it is merging with Rothmans, owned by Switzerland's Richemont. To celebrate the deal investors pushed BAT shares up by 16 percent to 624 pence.
There was plenty of other merger talk doing the rounds, although for once the telecom sector was exempted. Oil explorers Lasmo (LSMR) and Enterprise Oil (ETP) announced they are considering a merger. That prompted a 13 percent jump in Lasmo stock, but Enterprise shares slipped 2 percent to 278.5 pence.
Stocks to suffer Monday included the banking sector and such heavy dollar earners as the drug stocks.
In Frankfurt, a broker's downgrade pushed retailer Metro (FMEO) down 6 percent to 67.7 euros. Utility Viag (FVIA) slipped 3 percent to 476 euros, and BMW (FBMW) fell 24 euros to 709 euros.
Insurer Allianz (FALV) gave up its early gains to close down 2 percent at 338.5 euros.
The recent recovery at software supplier SAP (FSAP3) came to an end, with the stock declining 3 percent to 348.5 euros.
In Paris, investors fought shy of telecom equipment manufacturer Alcatel (PCGE), on the basis the possible link between Lucent (LU) and Ascend (ASND) could create a formidable competitor, and sending the Alcatel shares down 7 percent to 115 euros.
Auto components stocks were in demand however, with Michelin (PML) jumping 7 percent to 34.3 euros, and Valéo (PFR) gaining 5 percent.
Volvo and Fiat confirmed they are exploring merger possibilities, but markets already had priced in the announcement. Volvo shares slipped 6 percent to 217 crowns. In Milan, Fiat shares eased 3 percent to 3.13 euros.
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