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Rate woes rile bourses
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August 31, 1999: 12:57 p.m. ET
London, Frankfurt and Zurich tumble more than 2%; retailers rally for second day
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LONDON (CNNfn) - Fears of higher U.S. interest rates stalked European markets Tuesday, giving traders across the region a pretext to dump blue chips with the same gusto seen on Wall Street Friday and Monday. London, Frankfurt, Zurich, Amsterdam, Milan and Madrid all gave up 2 percent or more as traders took little solace in benign U.S. consumer confidence data. Paris eased 1.5 percent.
Only retail stocks managed to buck the trend with any consistency as consolidation talk gripped the sector following Monday's $16.6 billion tie-up in the French supermarket sector.
London's benchmark FTSE 100, which reopened for trade Tuesday following Monday's bank holiday, closed down 2.02 percent at a session low of 6,246.4, a loss of 128.8 points. Traders shrugged off a mid-morning rebound by the Dow Jones industrial average after a batch of U.S. economic reports suggested economic growth is continuing, but at a slower pace.
Declines in bank, telecom and pharmaceutical shares took a sizable chunk out of the blue chip index. But supermarkets performed impressively as investors scrambled to line up behind the next possible targets for a big takeover bid. Tesco (TSCO) jumped 3.95 percent, Sainsbury (SBRY) gained 1.18 percent and Kingfisher (KGF) added 0.88 percent.
In Frankfurt, rate-related fears dogged the electronic Xetra Dax throughout Tuesday's session, dragging the leading gauge 2.26 percent, or 121.76 points, lower to close at 5,270.77. Earlier, the Dax had attempted a fleeting recovery on the back of Wall Street gains but slipped anew as New York stocks retreated.
Retailer Metro (FMEO) was among a handful of gainers, rising 0.42 percent to 53.17 euros, building on Monday's gains, as investors bet on further tie-ups in the sector following Monday's megadeal between France's Carrefour and Promodès.
Paris's CAC 40 ended off 1.46 percent at 4,589.22, near its day low, though a late bounce on the Dow lent some support. Zurich SMI slid 2.04 percent to 7,008.8, matched in the minus column by Amsterdam.
Dutch supermarket Laurus sprinted up almost 5 percent, driven by retail-merger euphoria, while Ahold ended unchanged at 33.90 euros as investors awaited its next move.
The FTSE Eurotop 300, a broader index of the largest pan-European shares, reflected the regional malaise, ending 1.99 percent lower at 1,300.73. Only the retail sector advanced, propelled by bid talk in the wake of the French supermarket merger announced Monday. Retail stocks raced up 4.9 percent.
The proposed merger of France's Carrefour (PCA) and Promodès (PPE) to create the world's second-largest retailer, after U.S. giant Wal-Mart, fueled heavy buying of both companies' shares Tuesday. Carrefour spurted 9.69 percent to 154.0 euros, just shy of its lifetime high of 154.4 hit earlier in the day. Promodès advanced 7.72 percent to 893.0 euros, bringing its cumulative gains over the past two session to more than 25 percent.
The only other blue-chip gainers in Paris were carmaker Renault (PRNO) and retailer Casino (PCO), which climbed 2.37 percent and 3.85 percent, respectively.
In London, decliners outpaced advancers by a nine-to-one margin as fresh data revealing surging housing prices and consumer spending and confidence raised fears of an interest-rate hike.
Financial shares faced the heaviest selling pressure as profit taking came to bear in light corporate news.. Lloyds TSB (LLOY) tumbled 4.39 percent, NatWest (NWB) fell 3.11 percent, Bank of Scotland (BSCT) gave up 3.79 percent and Abbey National (ANL) dropped 4.24 percent.
Drug group SmithKline Beecham (SB) declined 3,29 percent after revealing a delay in regulatory approval for a cancer treatment.
The only positive note in Frankfurt came on confirmation by the Bavarian finance minister of merger talks between utility groups Viag (FVIA) and Veba (FVEB). Viag lost 1.34 percent while Veba shed 1.5 percent.
Financial stocks also weighed on the Dax. Dresdner Bank (FDRB) shed 3.3 percent while Deutsche Bank (FDBK) ended off 1.2 percent. Germany's biggest bank unveiled a technical joint venture Tuesday with Finnish cellular phone maker Nokia to develop mobile phone-based Internet banking services.
Swiss insurers and financial firms also were hard hit.
-- from staff and wire reports
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