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Rate talk dominates London
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March 3, 1999: 5:57 a.m. ET
London creeps into black as sterling peaks against euro; Dax remains down
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LONDON (CNNfn) - Europe's bourses continued to tread a cautious path Wednesday ahead of an expected rate decision in the U.K., and renewed anxiety over the German economy. But with the exception of Frankfurt, the major markets had executed a tentative about-face by mid-morning, creeping into positive territory.
After slumping at the open, the FTSE 100 was up 0.23 percent at 6,075 ahead of the Bank of England's rate decision due out midday, London time. Economists expect the bank to keep the key lending rate on hold, at 5.5 percent, though they don't rule out the possibility of a quarter percentage point cut.
British sterling hit a record high against the euro for the third straight day, breaking through its former peak of 67.40 pence per euro.
Frankfurt's electronically-traded Xetra Dax index slipped 4.81 points, or 0.1 percent, to 4,793.03. In Paris, the CAC 40 reversed its earlier course, rising nearly half a percentage point to 4,067.95, while in Zurich, the SMI index crept up 0.29 percent to 6,977.
In Frankfurt, a downward revision in an economic growth forecast Tuesday weighed on sentiment, along with continuing brinkmanship between a number of blue chip companies and the government of Chancellor Gerhard Schroeder over the latter's tax reform plans.
Blue-chip engineer GKN (GKN) was a standout performer on the FTSE 100, rising more than 3 percent, to 890-1/2 pence, after reporting profits at the top end of expectations Wednesday. The company said its outlook for 1999 remained strong despite weakness in the global auto sector.
Palm computer maker Psion (PON) pared some heavy early losses, but remained down around 1 percent at 750 pence. The company warned Wednesday that its 1999 profits would be dented by heavy investment costs in its Symbian joint venture.
Auto, financial and brewing stocks will also be in focus, after French car maker Peugeot (PUG), U.K. investment bank Schroder (SDR) and Dutch insurance giant Aegon reported earnings.
Peugeot was off nearly 1 percent in Paris after reporting 1998 earnings. The world's second largest brewer, Heineken, reported a 21 percent jump in operating profit in Amsterdam.
In Zurich, Swissair parent SAir Group shed 6.50 francs to 311.50 francs after reporting an 11 percent rise in net profit to 361 million francs, in line with expectations. Airline stocks around Europe could suffer from the airline's warning that 1999 will be a difficult year.
DaimlerChrysler reported an 8 percent rise in U.S. vehicle sales in February, compared with a year earlier. Daimler said total sales rose to 215,450 from 200,068 in the year-ago period. But company shares shifted down a gear in Frankfurt, slipping 1.50 euros to 82.50.
In the agrochemical sector, France's Rhône-Poulenc (PRPP) said Wednesday its talks with Germany's Hoechst (FHOE) on combining the companies' agrochemical operations were in a final stage. The Wall Street Journal reported the negotiations were expected to reach a conclusion Wednesday. Germany's Schering (FSCH) is expected to be a minority shareholder in the unit.
Rhône-Poulenc shares were off 0.84 percent in Paris, at 41.53 euros; Hoechst stock eased 0.70 to 38.70 euros in Frankfurt.
-- from staff and wire reports
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