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Europe closes lower
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May 15, 2000: 12:10 p.m. ET
Bourses weaken ahead of U.S. rate decision; telecoms off, defensives up
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LONDON (CNNfn) - Europe's major equity markets all ended lower Monday in thin trade as investors remained on the sidelines ahead of an expected rise in U.S. interest rates.
London's benchmark FTSE 100 index closed down 36 points, or 0.57 percent, at 6,247.70 as telecom and drug stocks were marked down, while defensive plays such as engineering shares posted narrow gains.
Utility and telecom shares weighed on Frankfurt's Xetra Dax, which closed down 1.02 percent at 7,195.15.
The CAC 40 index in Paris ended off 0.8 percent at 6,397.38, having earlier been the only bourse to crawl into the black during the session.
Tim Harris, European equity strategist at JP Morgan, said investors have priced in a half-point rise in U.S. interest rates and are focused on whether to continue unloading telecom stocks in exchange for defensive shares, such as drug and chemical firms.
"We continue to urge investors to wait for some market correction before committing new funds to equities," he said.
Bourses all lost ground after the mixed start on Wall Street, which saw the Nasdaq composite some 2 percent lower at the close of European trade. The Dow Jones industrial average was flat.
Most smaller markets had narrow losses, with the SMI in Zurich down 0.2 percent and the Ibex 35 in Madrid some 0.8 percent lower.
In the currency market, the euro fell to $0.9140 from $0.9197 in late trading in New York Friday. The yen continued to lose ground against the dollar, trading around 109.40 from 108.34.
Compass in a spin on merger talks
In London, contract catering company Compass Group (CPG) suffered the largest decline, slumping 14.7 percent after media and leisure group Granada Group (GAA) announced it was in merger talks with the firm. Granada shares rose 4 percent.
 Regional telecom operator Kingston Communications (KCOM) and cable operator Telewest Communications (TWT) lost 7 percent and Colt Telecom (CTM), a business networks operator, dropped 6.4 percent.
Tempering the declines among techs and telecoms was a 4.2 percent gain by Internet service provider Freeserve (FRE). Dixons (DXNS), its parent, rose 3.8 percent.
Among the unfashionable "old economy" shares to make headway, engineering companies GKN [LSEGKN] and Invensys (ISYS) rose more than 3 percent, while Hays (HYS), a provider of business and staff recruitment services, gained 2.6 percent. Reckitt Benckiser (RB-), a consumer-goods maker, gained 2.1 percent.
Outside the FTSE 100, shares in Britain's largest tourism firm, Thomson Travel (TRV), rose 6 percent after German leisure and engineering company Preussag agreed to buy the firm for $2.7 billion. The offer trumped a rival bid from C&N Touristic, Germany's No. 2 travel operator.
In Frankfurt, Preussag (FPRS) shares slumped 6 percent while Karstadt Quelle (FKAR), the retailer that owns 50 percent of C&N Touristic, closed up 1.5 percent.
 Deutsche Telekom (FDTE), the largest Dax constituent, closed down 4.2 percent and software developer SAP [FSE:FSAP3] lost 2.2 percent.
Degussa-Huels (FDHA) rose 2.2 percent after the specialty chemicals firm's parent, Veba, said it would merge the company with the chemical interests of its utility merger partner Viag.
Veba (FVEB) and Viag (FVIA) each lost 1.8 percent after European regulators said they would announce their decision on the planned combination June 7, raising speculation the companies may have to sell assets to meet antitrust concerns.
L'Oréal looking good
In Paris, data network operator Equant (PEQU) slid 8.4 percent after shedding 6.4 percent Friday on speculation the company might issue a profit warning with its first-quarter earnings, due after the market close Wednesday.
France Telecom (PFTE) ended 4.2 percent lower and STMicroelectronics (PSTM) lost 3.6 percent.
 Engineering firm Alstom (PALS) topped the CAC 40 with a 4.9 percent advance. Cosmetics maker L'Oréal (POR) rose 3.4 percent, lifted by booming exports as the weak euro cuts the cost of its products overseas.
Aerospace and defense stocks also limited the CAC's decline, with Aérospatiale-Matra (PAER) and Thomson-CSF (PHO) both up 3.7 percent. 
-- from staff and wire reports
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