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Europe sheds early gains
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November 26, 1999: 5:43 a.m. ET
Bourses reverse course after bright start as two big U.K. deals take center stage
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LONDON (CNNfn) - Europe's main bourses failed to hold on to their opening gains and slipped into the red by mid-morning Friday, despite a flurry of merger activity in the U.K. banking and media sectors.
Traders blamed a mild dose of profit-taking for the sudden reversal across the continent - both London and Paris notched up record closes in the last session, and crept into uncharted territory early Friday, before losing ground.
In London, the FTSE 100 slipped 7 points to 6,675.8, as a broad-based sell-off undermined early gains prompted by a 7.8 billion pound ($12.6 billion) merger in the media sector and an increased offer from Bank of Scotland (BSCT) in its hostile attempt to acquire larger rival NatWest (NWB).
In Paris, the CAC 40 also slid into negative territory, just 1 point lower at 5,351.22. Germany's Xetra Dax fell 7 points to 5,953.96. The SMI in Zurich was the only major bourse to hold onto gains as it traded 11 points higher at 7,326.0.
Europe got no guidance from Wall Street in the previous session, with all U.S markets closed for the Thanksgiving holiday.
Wall Street will open later Friday for a shortened trading session and U.S. stocks looked set to start in upbeat mood. S&P 500 futures were quoted 4.2 points higher on the Globex trading system at 1,425.70. London brokers calculated fair value, which takes into account the effect of dividend payments and interest costs, at 1,420.88.
In the currency markets, the single European currency remained under extreme pressure. The euro touched yet another life-time low against the yen at 105.55 and hovered just above a four-month low against the dollar of $1.0135.
The FTSE Eurotop 300, a broader measure of the largest pan-European stocks, was up just 3 points at 1,449.75. Media, technology and leisure sectors were the top three gainers.
Two big deals hogged the limelight in London in early trade. A tie-up between two blue-chip media firms saw Carlton Communications (CCM) shares soar almost 10 percent at the open after it agreed to merge with rival United News and Media (UNWS) in a $12.6 billion deal. Carlton's shares came back off their highs, however, to trade 7.4 percent higher. United's stock also lost some of its early strength to but still stood 5.7 percent higher.
Other U.K. media stocks soared on the merger. BSkyB (BSY) gained more than 9 percent, Granada (GAA) jumped 5 percent.
The other main focus was on the Bank of Scotland after it raised its hostile bid for rival NatWest by almost 7 billion pounds to 27.6 billion pounds. The move came the day after the U.K. regulator said Thursday he would have no objections to the two groups combining. NatWest jumped 3 percent, while Bank of Scotland's shares fell almost 6 percent.
Royal Bank of Scotland (RBOS), was almost 1 percent lower amid speculation it could come to NatWest's rescue.
GEC (GEC) was another big gainer in London, up almost 8 percent, on its last trading day before it completes the sale of its defense business to British Aerospace (BA-), due Monday. GEC will then change its name to Marconi to focus on its telecom business. BAe was up 1.7 percent
In Paris, telecom-related stocks made the early running but came off their early highs.
Bouygues (PEN) which has mobile phone operations, jumped 4 percent, while France Telecom (PFTE) shares rose 1.6 percent to a new record high. The latter's stock was boosted after the group said it planned to upgrade its Internet operations.
Conglomerate Lagardere (PMMB) surged almost 5 percent in early trade on reports the company is to buy a stake in Europe's largest pay-TV operator, Canal Plus (PAN). The latter's stock was flat.
In Frankfurt, blue chips were trading in a fairly tight range. Mannesmann (FMMN) was the biggest gainer as it jumped more than 2 percent on expectations that the world's largest ever hostile bid by the U.K.'s Vodafone AirTouch (VOD) could succeed. The latter's stock was up less than 1 percent in London.
In Amsterdam, struggling software giant Baan fell 4.5 percent amid reports one of the company's main investors would sell its shares.
-- from staff and wire reports
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