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Bourses lack direction
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June 28, 1999: 5:59 a.m. ET
Enthusiasm over bid talk offset by jitters ahead of expected U.S. rate hike
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LONDON (CNNfn) - European markets remained mixed at mid-morning Monday, as enthusiasm over corporate activity was offset by investor concern that the U.S. Federal Reserve will raise interest rates this week.
Traders are divided over the scope of the widely anticipated rate increase, with markets factoring in a 25 basis point rise, in line with the U.S. central bank's avowed tightening bias.
In London, the FTSE 100 was off 10 points, or 0.2 percent, at 6,425.8 despite a flurry of takeover speculation while the CAC 40 in Paris rebounded from a starting slump to nose up 21 points, or nearly half a percent, to 4,437.76 amid concrete corporate news.
Germany's Xetra Dax extended its gains to trade up 28 points at 5,328.77, a rise of 0.5 percent, buoyed by index heavyweight Deutsche Telekom (FDTE) as it priced a new offering of nearly 300 million shares. In Zurich, the SMI index remained stranded in the minus column after an early rise, trading down 20 points, 0.3 percent at 6.943.8.
The FTSE Eurotop 300 of the largest pan-European stocks advanced just 2.3 points to 1,312.49 as a rise in electrical and telecom companies canceled out losses in mining and beverage firms.
European investors took their cue from a positive session for U.S. blue chips Friday, with the Dow Jones industrial average managing a 17.73 point gain to end 10,552.56. Stocks had a mixed session, however, as both the Nasdaq Composite and the S&P 500 ended slightly lower.
S&P 500 futures trading on the Globex system indicated a strong start for Wall Street trading later Monday. S&P Futures added 3.50 to 1,332.50, while fair value for the futures index - taking account of dividend payments and interest costs -- was calculated at 1,327.42.
The insurance sector is likely to dominate the trading day in London, after a weekend report that two of the U.K.'s blue-chip insurers were close to a $16 billion merger. A U.K. newspaper said that an all-paper bid from CGU (CGU) for Royal and Sun Alliance (RSA) could come within weeks. CGU shares edged up 0.3 percent, to 927 pence, while Royal Sun stock shot up just over 3 percent, to 557 pence.
British gas retailer Centrica (CAN) led the blue chip gainers, racing up 3.2 percent to 142 pence ahead of an expected agreement this week to purchase Automobile Association, Britain's largest auto-breakdown service, for 1.1 billion pounds ($1.75 billion). The AA, which is owned by its members, has a near-50 percent share of the U.K. market for car-breakdown services.
Mining concern Rio Tinto (RIO) gained nearly 2 percent, while rival Billiton (BLT) added 0.6 percent.
Retail stocks could also see some interest, despite two of the U.K.'s largest retailers dampening reports of a merger.
Debenhams (DEB) denied it was talking to rival Storehouse (SHS) about a takeover. However, a report issued Monday indicated that the pace of mergers among U.K. retailers is likely to step up, following Wal-Mart's (WMT) acquisition of supermarket operator Asda (LSE:ASSD). Shares of Debenhams and Storehouse, which are both listed on the FTSE mid-cap index, fell 1 percent and 3.8 percent, respectively.
Shares in soccer club Newcastle United (NCU) continued to soar, rocketing 20 percent amid reports that cable operator NTL (NTLI) may revive a bid for the club.
Germany's leading index was initially buoyed by strong interest in telecom giant Deutsche Telekom (FDTE) after heavy demand for the almost 286 million new shares that started trading Monday. But after climbing more than 1 percent above the issue price of 39.5 euros, Telekom eased 3.7 percent to 39.95 euros.
Chemicals performed well as investors eyed cyclical stocks, with specialty chemicals producer Henkel (FHEN) gave up early gains, slipping 1.4 percent to 68.05 euros.
In Paris, shares in utility giant Suez Lyonnaise des Eaux (PLY) rose 0.6 percent to 163.2 euros after it said it would pay $4.1 billion for U.S. water treatment group Nalco (NLC ).
Cable operator Canal Plus (PAN) jumped 2.7 percent after securing the rights to French soccer matches next season.
France Telecom (PFTE) was off 0.8 percent.
In Zurich, Swissair parent SAir Group secured a 20 percent stake in South African Airways. The stock added 1 percent to 329.00 Swiss francs.
-- from staff and wire reports
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