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Rate jitters weigh on bourses
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May 17, 1999: 5:59 a.m. ET
London and Paris more than 1 percent lower as U.S. interest rates cast a shadow
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LONDON (CNNfn) - European stock markets were firmly in the red Monday, with London and Paris over 1 percent lower and the others not far behind. Bourses added to the sharp sell-off Friday after stronger-than-expected U.S. inflation data fanned fears of rising U.S. interest rates.
London's FTSE 100 suffered as a selling pressures bore down on most sectors, with the index down almost 64 points at 6,236.9, a fall of just over 1 percent.
The CAC 40 in Paris recovered some of its earlier losses but was still well in the red, 49 points lower at 4,275.04, a loss of 1.13 percent. The reaction to Friday's fall on the Dow is likely to hit home in France during this session after weak volumes at the end of last week due to a public holiday.
Germany's electronic Xetra Dax trod water mid-morning, down just over 51 points to 5,132.27, a fall of 0.99 percent.
Swiss shares regained some ground but the SMI in Zurich was still off 63 points at 7,008.3. Financial stocks, which are highly susceptible to interest rate change, are a dominant force on the index so few traders saw signs of a big rebound Monday.
European stocks reacted further to Friday's near-2 percent plunge on the Dow Jones Industrial average following the release of robust U.S. consumer price data.
The U.S. CPI figures exacerbated concerns that the Federal Open Market Committee could move toward a tightening bias at its meeting Tuesday.
Japanese and Hong Kong shares tumbled sharply Monday on the back of Wall Street's steep losses, partly on fears that a slowdown in the U.S. economy could ripple into Asia, and especially Japan's U.S.-dependent export sector.
The Dow lost 193.87 points, or 1.75 percent, to end at 10,913.32 Friday as investors dumped stocks amid surging bond yields.
Early indications are that the Dow is set for another downbeat session Monday. The index for S&P 500 futures contacts trading on the Globex trading system was down 4.80 points at 1,334.50 in early trade. In London brokers estimated fair value for the S&P futures index to be 1,342.52.
A lack of corporate news across Europe is likely to keep the focus on interest rates across the Atlantic throughout the session.
The official announcement that the revised merger between Hoechst (FHOE) and Rhône-Poulenc (PRPP) would go ahead helped pull up the French company's stock in Paris. Rhône's stock was up 1.57 percent at 47.33 euros, but Hoechst's shares were off 0.25 euros at 40.00 euros in Frankfurt. The German company's major shareholder, Kuwait Petroleum Company, approved the new plan last Thursday.
Under the revamped proposal, the German company's shareholders would get a majority stake in the combined company, meeting the conditions laid down by KPC.
U.K. pay-T.V. giant British Sky Broadcasting (BSY) denied a weekend newspaper report that it was relaunching merger talks with France's Canal Plus (PAN) as part of Rupert Murdoch's broader strategy of breaking into the European cable television market. The French cable company's stock was up 2 euros in Paris at 259.1, while BSkyB was off 1.28 percent in London.
The fallen star of the U.K. retailing sector, Marks & Spencer (MKS), was off almost 3.4 percent at 378 pence in London, ahead of its results out Tuesday, after heavy losses in recent sessions.
Pharmaceutical heavyweight SmithKline Beecham (SB) was off over 3 percent at 773 pence, following a strong rise last week.
Banking shares were under pressure across Europe. The London index's largest bank, Lloyds TSB (LLOY), was 1.58 percent lower at 871 pence, while National Westminster Bank (NWB) was off 1.17 percent at 1,349 pence.
In Zurich, CS Group was off 2.76 percent at 264.50 Swiss francs, while UBS was down 2.25 percent at 478.50.
In Frankfurt, Hypovereinsbank slumped almost 3.3 percent to 56 euros and Dresdner Bank (FDRB) was 2.24 percent lower at 37.15 euros.
German electrical giant Siemens (FSIE) eased to 70.40 euros in Frankfurt despite unveiling a 17 percent jump in first-half net income before one-time items.
In the agricultural sector, New Holland (NH), a European maker of farm and construction equipment, agreed to acquire U.S. rival Case Corp. (CSE) in an all-cash deal valued at $4.3 billion, the companies announced Monday.
Italian industrial group Fiat, which owns 71 percent of New Holland, was almost 4 percent lower in Milan.
--from staff and wire reports
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