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Bourses feel Brazil's heat
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January 22, 1999: 8:41 a.m. ET
European markets more than 2% lower at mid-session
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LONDON (CNNfn) - Selling momentum gathered in Europe by mid-session as fears over Brazil and Asia continued to weigh on stock prices. Indications that New York will open lower further undermined European bourses.
Despite some takeover news, investors preferred to concentrate on the broader picture, and the possible consequences of Brazil's economic dilemma spreading to the rest of Latin America and across to South East Asia.
That meant a hunt for companies with substantial exposure to those regions. The heaviest decliners were in the auto and banking sectors, with Madrid and Milan the markets that were hit the most.
In London the FTSE 100 slumped 160 points, 2.6 percent, to 5,862.6. U.K. preliminary GDP figures for the final quarter of 1998 were stronger than expected, but economists said lower interest rates still lie ahead.
In Frankfurt the Xetra Dax fell more than 3 percent, 175 points, to 4,988.38. The CAC 40 fell a similar percentage to 4,014.92, leaving investors nervously eyeing the 4,000 level. Zurich's SMI dipped 2 percent to 6,998.7, and the Ibex 35 index in Madrid fell more than 4 percent.
Insurer Royal & Sun Alliance (RSA) confirmed it is in talks to buy rival Guardian Royal Exchange (GARD), but RSA shareholders dumped the stock, sending it down 5 percent to 462 pence. GRE shares rose 4 percent to 369 pence.
The rest of the market headed steadily downward, and frightened investors were happy to bail out of favorite sectors such as telecommunications stocks. Colt Telecom (CTM) slid 7 percent to 1,207 pence after recent strong gains, and Cable & Wireless (CW.) slumped a similar amount to 871 pence. The stock's Hong Kong connections put it particularly out of favor.
In Frankfurt banks and auto stocks, which have a heavy representation in the blue-chip index, led the market lower.
Volkswagen (FVOW) dipped 5 percent to 68.5 euros, while DaimlerChrysler fell 4 percent to 88.65 euros. Deutsche Bank (FDBK) led financial stocks into negative territory, falling 5 percent to 46.8 euros.
Paris investors bolted unceremoniously from the banking sector. CCF (PCCF) tumbled more than 6 percent to 76.7 euros, and BNP (PBNP) fell more than 4 percent to 74 euros.
Car maker Renault (PRNO), which has a significant presence in Brazil, dropped 5 percent to 41.6 euros. Luggage and spirits group LVMH (PMC) slipped almost 6 percent to 205.5 euros on concerns for its Asian operations.
A caning for Spanish banks brought Madrid sharply lower. The major players such as BBV, Banco Santander and Banco Central Hispano all fell by some 6 percent.
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