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Bourses keep their cool
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June 29, 1999: 5:52 a.m. ET
Most markets up cautiously as traders take heart in prospect of mild rate hike
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LONDON (CNNfn) - Most European markets advanced gingerly Tuesday as traders awaited a verdict on U.S. interest rates from the Federal Reserve, which kicks off a two-day policy meeting Tuesday. Expectations of a more modest, quarter percentage point hike fueled a firm performance in Tokyo and on Wall Street overnight.
A three-digit rally on the Dow Jones industrial average took some of the edge off traders' jitters as they awaited the outcome of a Fed meeting that has kept European traders in a frenzied guessing game about how far the Fed will go in demonstrating its avowed tightening "bias".
In London, the benchmark FTSE 100 slipped half a percent to 6372.8. The CAC 40 in Paris continued its recent recovery to gain 19 points or 0.43 percent to 4,484.35.
Frankfurt's Xetra Dax lost some of its early glow, but remained up nearly 5 points, or 0.1 percent, at 5,361.63, while the SMI in Zurich posted the most solid gains, ratcheting up 0.6 percent to 6,985.5.
The FTSE Eurotop 300 of the largest pan-European stocks reflected the narrow trading with a 5.83 point gain to 1,318.72.
Sentiment was boosted by a more than 170 point gain in Tokyo, where the Nikkei closed at 17,782.79, and an unexpectedly strong showing on Wall Street Monday.
The Dow Jones industrial average rose 102.59 points, or nearly 1 percent, to close at 10,655.15. Tech stocks fared even better as the Nasdaq Composite rose 49.80 points, or 1.95 percent, to 2,602.45, while the S&P 500 index gained 16.04, or 1.2 percent, to 1,331.35.
U.S. markets were expected to open flat Tuesday, with S&P futures down 0.50 at 1,343.50 while fair value, which takes into account interest and dividend effects, was quoted at 1,343.57.
The U.S. gains helped calm fears around the globe of a bigger-than-expected rate rise by the Federal Reserve. Its monetary committee meets later Tuesday with a rate decision expected Wednesday. Markets have factored in a rise of a quarter of one percent.
Takeover battles propped up London in light trading. Halifax (HFX) jumped 2.6 percent to 778 pence on speculation that the bank may join the latest spree of bid activity in the financial sector. Rival Woolwich was unchanged at 385 pence.
Allied Domecq (ALLD) was up nearly 1.1 percent, at 612 pence, as hotel and brewing group Whitbread (WTB) sought to sweeten its bid for the firm's pub assets with a share buy-back plan. Advisers told London's Financial Times they believe Whitbread can increase its cash bid by up to 10 percent without forfeiting tax clearances granted by British tax authorities. Whitbread shares were up 2 percent at 1,050 pence in London.
Security group Williams (WLMS) fell 4.26 percent to 408 pence amid reports that its takeover talks with Tyco International have run into trouble after a failure by both sides to agree on a price.
Industrial gases group BOC (BOC) gained 2.7 percent, to 1,244 pence, after a report in the Financial Times that it is in talks with France's Air Liquide (PAI). Air Liquide stock advanced 0.7 percent in Paris.
British Telecom {LSE:BT] added just under 1 percent after securing U.S. regulatory clearance for its $10 billion global joint venture with AT&T (T). BT said the development paved the way for a regulatory green light from all quarters by the autumn.
In Frankfurt, financial and telecom stocks led the gainers. Mannesmann (FMMW) added more than 4 percent, building on earlier gains, while Deutsche Telecom (FDTE) the Dax's most heavily weighted stock, notched up fractionally, to 40.30 euros, adding to Monday's 2 percent gains when the firm kicked off trading of its 286 million-strong new equity issue.
In Paris, Suez Lyonnaise des Eaux (PLY) jumped 3 percent as investors continued to applaud its purchase of U.S.-based Nalco Chemical (NLC).
Investment certificates in France's Crédit Lyonnais [PAR:P fell 4 percent Tuesday in Paris after the French government priced its planned share issue at the tope end of its range, at 26.2 euros. Holders of the investment certificates will have to pay 0.6 euro for one of the new shares.
--from staff and wire reports
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