Europe hit by credit crunch fears
J.P. Morgan, Chase, BoE warnings spike bank stocks
By Philip Stafford, FTMarketWatch
Last Update: 12:16 PM ET Dec 14, 2000 NewsWatch
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LONDON (FTMW) -- European stock markets finished the day deep in the red on Thursday as telecom and banking stocks were hit by concern over weak capital markets in 2001.
Telecom stocks, such as the world's largest mobile operator Vodafone (VOD: news, msgs) , led decliners after the Bank of England said the risk of lending to the telecoms sector has risen since June. See Bank of England statement Vodafone shares fell 5.6 percent.
Bourses, already falling on fears telecoms stocks will be saddled with higher debts caused by raised interest rates, were further pressured after merging U.S. investment banks J.P. Morgan (JPM: news, msgs) and Chase Manhattan (CMB: news, msgs) both issued profit warnings. The companies cited a "difficult capital markets environment". See story
The Bank of England statement also hit bank shares, already under pressure after Goldman Sachs downgraded five European banks on concern over bad debt levels. Many have lent money to finance telecoms expansion plans.
Dutch bank ABN Amro (ABN: news, msgs) led decliners, down 5.4 percent as it also has extensive exposure to investment banking operations in the U.S.
Declines in banking and telecom stocks hit Europe's benchmark indices. The pan-European FTSE Eurotop 100 index was down 1.9 percent. Media stocks also slid. See European indices at a glance
Overview
Markets extended losses after U.S. markets slid in morning trade. The Dow Jones Industrial Average (DJIA: news, msgs) was 1.1 percent lower, while the Nasdaq (COMP: news, msgs) reversed earlier gains to trade nearly 1 percent lower. See New York markets story
However, the last half hour of trade in Europe saw markets come off earlier lows. The FTSE 100 index closed 2.2 percent lower, while the Frankfurt DAX 30 was 1.8 percent lower in late trade. See London Markets report
The Paris CAC 40 index closed down nearly 1 percent.
It was another tough day on Europe's tech-heavy indices. The FTSE TechMARK index was down 4.3 percent, while the Frankfurt's Neuer Markt came of off lows to trade 4.2 percent lower in late trade. The Paris Nouveau Marche was down 1.8 percent.
Weak telecoms, banks
Among other weak telecom stocks, Dutch telecoms operator KPN (KPN: news, msgs) fell 5.2 percent. The news comes a day after ratings agency Moody's Investors Service warned it might cut its credit rating for KPN.
After investing heavily in third-generation infrastructure, KPN's net debt is around €25.4 billion, making it one of the largest debts among European telecoms operators. See FT.com story It also plans to buy the rest of its KPN Orange mobile unit for 500 million euros. See more on KPN
British Telecom , which says it will have a net debt of 30 billion pounds by the end of March, was down 3.6 percent. The DJ STOXX telecoms index slid 4.1 percent.
Banking stocks suffered a double whammy. In addition to the Goldman downgrade, the J.P. Morgan/Chase profit warnings hit stocks.
Goldman also downgraded Societe Generale, Deutsche Bank , BNP Paribas and Credit Lyonnais. The sector fell 2.5 percent on the DJ STOXX banking index. See Analysts' Ratings
Shares in Deutsche Bank were down 4.7 percent in late trade, BNP closed down 4 percent. Credit Lyonnais and Societe Generale dropped 3 percent and more than 4.8 percent respectively.
Gainers, media down
A few selected stocks with more visible earnings growth made gains on an otherwise red day.
German steel maker Thyssen Krupp rose as much as 3.3 percent and French hotelier Accor advanced 2.8 percent as investors moved to defensive plays. British American Tobacco rose 2.7 percent. U.K. utility group Lattice rose 6.2 percent.
Food and beverage stocks also advanced. U.K. drinks maker Diageo rose 2.9 percent and Associated British Foods was up.
Media stocks were also big decliners among DJ STOXX indices. U.K. media company Daily Mail & General led fallers, down as much as 7.2 percent after it reported full-year profits below expectations. See more on the Daily Mail
Among other decliners, U.K. TV company Carlton Communications fell 7.4 percent and Dutch cable company United Pan-European Communications (UPCOY: news, msgs) was down 6.3 percent. Granada Media fell 7 percent after United News and Media said it would take 1.25 billion pounds in cash from Granada, rather than shares, as part of its TV asset sales. See more on United News
Techs down
Among stocks in focus, German electronics company Siemens was down 3.6 percent in late trade despite its forecast of double-digit growth in fiscal year 2000/2001. See more on Siemens
German chipmaker Infineon fell 5.4 percent, also pressured after Siemens said it would reduce its stake in the chip unit.
It was another tough day for U.K. hardware tech stocks. Fibre-optic network component maker Bookham Technologies fell as much as 9 percent, electronics and telecoms equipment maker Marconi declined 6 percent
Lloyds TSB, meanwhile, said it was "disappointed" Abbey National had rejected its latest takeover bid of around 18.6 billion pounds, preparing the way for a hostile bid. See more on Lloyds Lloyds was down 0.4 percent and Abbey National rose 2.2 percent. |
