|
London off on Fed worries
|
 |
June 29, 1999: 1:03 p.m. ET
As U.S. rate decision nears, FTSE sinks 1.5%; Dax flat, Paris and Zurich gain
|
LONDON (CNNfn) - As the zero hour neared for a widely expected U.S. interest rate hike, London traders lost their composure Tuesday, sending Europe's leading stock gauge down 1.5 percent to a four-week closing low. Frankfurt stocks finished flat, while Paris and Zurich edged nearly 1 percent higher despite a soft start on Wall Street.
On a day dominated by speculation about the scope of a widely expected U.S. rate hike. The FTSE 100 sank to a sharply lower close of 6,307.1, down 98.6 points and near a session low of 6,301.1. Traders attributed some of the downturn to last-minute position-squaring by investors as the second quarter nears its close.
In Frankfurt, the electronic Xetra Dax finished flat at 5,359.53 as investors remained standoffish ahead of the Federal Reserve's rate verdict. The market has factored in a quarter-percentage-point hike, though some economists are bracing for the possibility of a half-percent increase.
In Paris, the CAC 40 index of leading components resisted the soft start on Wall Street to close 0.9 percent higher at 4,503.83, a gain of 38.60 points, while Zurich's SMI climbed 0.9 percent to finish at 7,007.0.
With the Federal Reserve's policy-making committee kicking off a two-day meeting in Washington, the question on European traders' minds was not whether there will be a rate hike but how much. Markets already have factored in a quarter-percentage-point increase in line with the Fed's publicly-espoused tightening bias, but some economists are bracing for a larger, half-point increase.
Rate-sensitive banking stocks, often the most vulnerable at times of Fed-related uncertainty, saw some substantial erosion Tuesday.
Bank of Scotland (BSCT) fell 3.6 percent, off its earlier lows, while Lloyds [LSE:LLOY ] eased 0.1 percent and HSBC (HSBA) suffered a nearly 3 percent loss in a setback tied to its Asian performance.
Bucking the trend, shares of British insurer Prudential (PRU) jumped 4.1 percent, to 935 pence, making it one of the top gainers on the FTSE 100, after a report in the Financial Times highlighted Prudential's efforts at corporate overhaul. The article focused on Prudential's plans to chop 4,000 jobs and develop its online Egg banking unit, among other measures.
U.K. cement group Blue Circle (BCI) fell 4.6 percent a day after putting its heating division on the sales block and issuing a warning related to its activities in Malaysia. Broker ABN Amro cut its estimate for the firm following the news.
Allied Domecq (ALLD) added 0.8 percent to 610 pence as rival bidders for its pub assets sweetened their bids. Hotel and leisure group Whitbread (WTB) lost 1.4 percent, to end at 1,015 pence, after announcing a share buyback plan, while rival bidder Punch Taverns added 4 percent to its cash offer. Brewing and leisure group Bass (BASS) slid 4.1 percent to 890 pence.
Industrial gases group BOC (BOC) gained 1.2 percent to close at 1,239 pence amid reports that it has been approached again by France's Air Liquide (PAI) after rejecting an earlier joint bid alongside U.S.-based Air Products. Air Liquide stock advanced 0.4 percent in Paris.
British Telecom {LSE:BT] shed 1.7 percent despite securing U.S. regulatory clearance for its $10 billion global joint venture with AT&T (T). BT said the development paved the way for a regulatory green light from all quarters by the autumn.
British regional water company Severn Trent (SVT) leapt 4.4 percent to 977 pence after announcing the appointment of a new CEO.
In Frankfurt, financial and telecom stocks led the small band of gainers. Mannesmann (FMMW) rose 1.6 percent to 146.61 euros after Goldman Sachs lifted its earnings estimate for the telecom firm. Deutsche Bank (FDBK) added just over 3 percent on the back of news that Frank Newman, Bankers Trust's former chairman, planned to leave Deutsche Bank.
Lufthansa (FLHA) shares slipped 2.9 percent after Credit Suisse First Boston shaved its earnings estimate.
In Paris, Suez Lyonnaise des Eaux (PLY) jumped 4.2 percent as investors continued to applaud its purchase of U.S.-based Nalco Chemical (NLC). The company outshone the CAC 40, which drew momentum from a brightening domestic economic outlook.
Chipmaker STMicroelectronics catapulted up 4.8 percent in the largest blue-chip gain of the day on the CAC 40.
Investment certificates in France's Crédit Lyonnais (PCI) fell 4 percent Tuesday in Paris after the French government priced its planned share issue at the tope end of its range, at 26.2 euros. Holders of the investment certificates will have to pay 0.6 euro for one of the new shares. 
-- from staff and wire reports
|
|
|
|
|
 |
|
