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Bourses fall to earth
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January 7, 1999: 1:07 p.m. ET
Even rate cuts can't prevent Europe's New Year rally hitting the buffers
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LONDON (CNNfn) - A sharp dose of reality brought European investors back to earth with a bang Thursday, as bourses gave up a large part of their New Year gains.
Rate cuts in Britain and Denmark failed to stem a wave of selling across the continent. Despite Asia's rally overnight, European investors preferred to look at a falling Wall Street, impeachment hearings for Bill Clinton and the possibility of a Brazilian debt default.
Added to the strong run in recent days those factors provided a recipe for investors to pocket some cash. The markets showed some backbone however, coming off their lows in late afternoon trade as bargain hunters stepped in. Amsterdam suffered the greatest percentage decline - at one stage the market was suspended after the AEX index breached its percent trading range. The index ended the session down almost 4 percent.
The Bank of England's rate cut was unexpected, but created no shocks. London's equity market tumbled in the afternoon session, with the FTSE 100 dipping 48 points. The index closed at 6,101.2, down 0.8 percent.
Frankfurt's Xetra Dax suffered a 97 point fall to end the session at 5,345.71, and the CAC 40 in Paris slipped 1.5 percent, 64 points, to 4,230.67. In Zurich the SMI lost 119 points to close at 7,549.7, down 1.6 percent.
Some stocks resisted, with brokers' buy notes helping British American Tobacco (BATS) to gain 5 percent to 523 pence, and support services provider Hays (HAS) rising 5 percent to 573 pence.
Telecom stocks, the hottest sector in the market over the past year, led the downturn. Colt Telecom (CTM) tumbled 5 percent to 1,079 pence and Vodafone (VOD) slipped 1 percent to 1,075 pence, as investors digested the prospect of a bidding war for U.S. group AirTouch (ATI).
Software group SAP (FSAP3) was the only real victor in Frankfurt. The shares continued their recovery from a mauling Tuesday to rise a further 2 percent to 348 euros.
Retailers bore the brunt of the selling pressure. Department store operator Karstadt (FKAR) fell 5 percent to 430 euros, and rival Metro (FMEO) slumped similar amount to 73.2 euros.
Auto stocks suffered as bid speculation faltered. BMW (FBMW) dipped 2 percent to 722 euros. Volkswagen (FVOW) fell 2 percent to 77 euros.
A diverse bunch of stocks led the Paris market lower. Cosmetics group L'Oréal (POR) lost face as its shares tumbled 6 percent to 636 euros. Missiles maker Lagardère (PMMB) fell the same amount to 35.75 euros, and bank Société Générale (PGLE) fell 11 euros to 158 euros.
Car maker Renault (PRNO) announced a 16 percent rise in unit sales for 1998, but gloomy comments on the prospects for the year ahead took the shares down 4 percent to 41.2 euros. Rival Peugeot (PUG) dropped 4 percent to 138 euros in sympathy.
In Zurich CS Group slipped 4 percent to 237 francs.
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