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Bourses beat a retreat
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January 18, 2000: 1:09 p.m. ET
Rate fears, Wall St. weakness, oil price spurt drive European markets lower
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LONDON (CNNfn) - European equity markets slid sharply Tuesday, with London, Paris and Frankfurt ending down more than 2 percent. A weak start on Wall Street added to European anxiety over the outlook for U.S. monetary policy.
In London, Vodafone AirTouch suffered a big setback as Germany's Mannesmann stepped up its defenses against a hostile takeover by its British rival. Rising oil prices - which hit nine-year highs in Asia and New York, and just missed doing so in Europe - compounded the jittery mood over interest rates.
London's benchmark FTSE 100 closed down 164.9 points, or 2.5 percent, at 6,504.6, weighed down by heavy losses in a host of leading telecom and pharmaceutical issues.
Paris was the region's biggest loser Tuesday, with the CAC 40 skidding 169.83 points, or 2.9 percent, to 5,672.95 amid heavy selling of technology and telecom stocks.
In Frankfurt, the electronically traded Xetra Dax slid 2.6 percent to 7,072.12, a loss of 186.78 points after an erratic session that saw the blue-chip index breach the 7,300 mark at one point to hit an all-time intraday high of 7,306.48.
The blue-chip Aex gauge in Amsterdam declined 2.1 percent, while the Ibex-35 index in Madrid gave up 1.9 percent and the Omx in Stockholm retreated 2.4 percent. Zurich's SMI dropped 1.4 percent to 7,404.8.
The losses came amid a backdrop of inflationary and rate-related fears that sent euro-zone bond yields soaring to 27-month highs, spurred by rumors that Germany's Ifo business climate survey for December will show a sharp increase when it's released later this week.
Ifo, a research institute, noted that it hadn't completed the survey. But the speculation heightened expectations that the data will prod the European Central Bank in the direction of a rate increase.
Strong industrial data in the United Kingdom, showing output in British manufacturing growing in November at its fastest rate in 4-1/2 years, raised concerns the Bank of England may be gearing up for another hike of its own.
The FTSE Eurotop 300, a pan-European index that offers a snapshot of the regional mood, ended 2.2 percent lower at 1,530.13.
The euro drifted above the $1.01 mark, about a quarter of a cent above the day's low of $1.0075.
Some prominent telecom companies involved in a prolonged bout of takeover intrigue suffered losses on Tuesday.
In London, Vodafone AirTouch (VOD) slid 3.8 percent, hit by the news from German takeover target Mannesmann (FMMW) that it is in alliance talks with partners, including France's Vivendi. Mannesmann is seeking to Vivendi's 44 percent stake in French mobile-phone operator Cégétel, according to the Financial Times.
Mannesmann shares tumbled 4.4 percent, while Vivendi (PEX) retreated 3.5 percent. Both Mannesmann and Vodafone gained more than 6 percent Monday.
Other telecoms affected by the negative mood in the sector Tuesday in London included heavyweight British Telecommunications (BT-A), which 4.1 percent, Cable & Wireless (CW-), which gave up 3.2 percent, Telewest (TWT), down 5.9 percent, and Colt Telecom, off 7.1 percent.
In Milan, sharp gains by Telecom Italia helped cushion the fall on the blue-chip MIB 30 index. Telecom Italia ended more than 5 percent higher, at 15.58 euros, after its Internet arm, Tin.it, unveiled an electronic commerce venture with Servizi Interbancari. The MIB 30 closed down 0.9 percent at 41,550.
Leading the blue-chip advancers on the FTSE 100, Schroders (SDR) leapt 13.5 percent amid an announcement that it is selling its investment banking division to U.S. financial firm Salomon Smith Barney for 1.35 billion pounds ($2.2 billion). Schroders said it had decided to concentrate on asset management and private banking.
British Airways (BAY) gave up more than 3 percent, following Standard & Poor's announcement Monday that it lowered its ratings on the airline's creditworthiness.
In the profit column, financial information service provider Reuters (RTR) jumped 3.3 percent beyond earlier highs, as it strengthened its takeover defenses and announced a management change.
Heavyweight oil stock BP Amoco (BPA) gained 0.8 percent, buoyed by continued optimism over OPEC pledges to extend production curbs past a March deadline. Rival Shell (SHEL) eased 3.2 percent, however.
Crude oil prices rose to nine-year highs in both Asia and New York Tuesday - a feat that Europe failed to duplicate. Benchmark crude for March delivery was at $26.00 a barrel in London late Tuesday, off earlier highs and 15 cents shy of its nine-year peak achieved in mid-December.
The Paris market was crimped by a sell-off in some high-tech heavyweights. Semiconductor maker STMicrolectronics (PSTM) slid 5.8 percent, computer consultant Cap Gemini (PCAP) gave up 3.7 percent, and telecom equipment provider Alcatel (PCGE) eased 4.4 percent.
Drug giant Sanofi-Synthalebo (PSAN) fell 5.25 percent after recent gains, while media and defense firm Lagardère (PMB), which surged 7 percent Monday, erased most of those gains as it lost 6.4 percent. Heavyweight France Telecom (PFTE) edged up more than 1 percent, while construction-to-communications provider Bouygues (PEN) ended flat at 660 euros.
In Frankfurt, specialty chemical producer Degussa-Huels (FDGS) ended down 5.3 percent despite publishing an estimate that 1999 operating profit was 40 percent higher than in the previous year. Rival Bayer (FBAY) shed more than 2 percent.
Software maker SAP [FSE:FSAP3] slipped about 1 percent, even after reporting higher software revenues for 1999 and saying it favors a share-buyback to secure subscription rights for an employee stock option program.
Dutch software maker Baan rose 4.75 percent on takeover speculation following the recent loss of two top executives. 
--from staff and wire reports
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