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Rate fears dog Europe
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January 11, 2000: 12:43 p.m. ET
Financial, telecom shares weaken bourses; media shares still shine
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LONDON (CNNfn) - - Europe's major stock markets closed lower Tuesday as concern over higher interest rates pulled down telecom and financial shares.
London's benchmark FTSE 100 index closed just above its session floor at 6,518.90, a loss of 1.3 percent, after making firm gains in the previous two session.
The CAC 40 in Paris ended 0.6 percent lower at 5,613.90, while the Xetra Dax in Frankfurt ended down 0.5 percent at 6,891.25.
Zurich's SMI eased 0.4 percent to close at 7,420.10, while the AEX in Amsterdam ended down almost 1 percent at 648.94.
Bourses received little direction from a sluggish start on Wall Street, with the Dow Jones industrial average trading 0.5 percent higher at the close of Europe's trading session.
Rate fears revived after Germany's giant IG Metall union posted a claim for a 5.5 percent rise in wages, well above analysts' expectations.
The wage factor is seen as a key determinant of the European Central Bank's next decision on euro-zone interest rates, with most observers expecting a hike in March or April.
While the news initially dented the euro, the single currency recovered to end the session almost 80 cents ahead at $1.0330.
The FTSE Eurotop 300, a broader index of the largest European stocks, closed down 0.7 percent at 1,513.39. Its media constituents remained lively, climbing 4.7 percent in the wake of the $182 billion AOL-Time Warner merger. Food, beverage and banking shares all lost ground.
Media, retail and telecom shares dominated trading in London, with media content providers continuing to ride a wave of buying interest as the AOL-Time Warner merger led analysts to reappraise existing valuations.
Daily Mail & General Trust (DMGO), a newspaper publisher and provider of financial news, led the gainers with an 11.2 percent advance.
Financial Times' publisher Pearson (PSON) rose 9.6 percent and news agency Reuters (RTR) advanced 10.2 percent after double-digit percentage gains Monday. Music publisher EMI (EMI) added 5.6 percent and business publisher Reed (REED) climbed 4.7 percent.
Cable company Telewest Communications (TWT) closing up 7.4 percent, though off its session peak. The shares bounced on the announcement Monday of new partners for its interactive TV venture.
However, the index's biggest components slipped back. Vodafone AirTouch (VOD) finished down 1.2 percent, giving up an early gain after announcing partners for its own wireless Internet service.
British Telecommunications (BT-A) slid 3.1 percent after announcing a $2.46 billion white-knight bid for Esat, Ireland's second-largest telephone company. BT beat off a hostile bid from Norway's Telinor and aimed to complete the purchase by April.
Software provider Sema (SEM) was the best-placed technology component, gaining 4.4 percent, though most stocks in the sector slipped back.
Aside from weak telecom shares, a slide in financial stocks was the main drag on the FTSE amid expectations that the Bank of England will hike interest rates Thursday.
Mortgage bank Abbey National (ANL) slid 6.24 percent while the four largest retail banks -- HSBC (HSBA), Lloyds (LLOY), National Westminster (NWB) and Barclays (BARC) -- all shed more than 2 percent.
Retailer Kingfisher (KGF) plunged 14 percent after reporting flat sales and falling margins in its latest business update, prompting a number of analysts to cut their earnings forecasts. Rival Marks & Spencer (MKS) lost 4 percent after its sales update.
Defensive shares also lost ground, with Associated British Foods (ABF) plunging 11.5 percent after firm gains last week.
Frankfurt suffered across-the-board losses, with chemical stocks marked sharply down as investors turned bearish on cyclical shares. BASF (FBAS), Europe's largest chemical company, lost 4.4 percent and rival Bayer (FBAY) closed 3 percent lower.
Deutsche Telekom (TDTE) ended narrowly lower, while rival Mannesmann (FMMW) dropped 0.6 percent.
DaimlerChrysler (FDCX) was the weakest of the auto stocks, down 1.4 percent, but Volkswagen (FVOW) added 1.4 percent after a report that it may make further cuts at its loss-making Rover arm.
Software maker SAP [FSE:FSAP3] continued its strong run with a 1 percent advance.
Internet strategies helped limit the losses in Paris, with technology consultant Cap Gemini (PCAP) closing up 8.3 percent after announcing plans to team up with Oracle (ORCL) to develop e-business platforms.
However, data network provider Equant (PEQU) lost almost all of its early 4 percent climb after announcing plans to launch an integrated data network based on Internet technology. The stock had earlier been suspended after a 10 percent surge.
Media and defense group Lagardere led the CAC, closing 9 percent higher after it announced (PMMB) plans Monday to buy a 34 percent stake in Canal Satellite.
Cyclical stocks lost ground, with construction firm Lafarge (PLG) heading the CAC declines with a loss of 7.6 percent. Auto parts maker Valeo (PVAL) shed 3.4 percent.
However, the market was undermined by a sharp fall in France Telecom (PFTE), which lost 3.1 percent in line with the sector sell-off across Europe.
Financial stocks also lost ground, with BNP (PBNP) down 3.7 percent and Dexia (PDEX) off 4.3 percent.
Zurich was pegged back by a 2.7 percent fall in Swisscom, while Amsterdam was hit by a 15 percent slump in software maker Baan, whose shares fell heavily last week after a profit warning. 
-- from staff and wire reports
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