Accounting fears spread to Europe
From Rob Branch in London
03jul02
themercury.news.com.au
EUROPEAN share prices have tumbled amid concerns about accounting standards, fresh losses on US markets and a plunge in the value of French media group Vivendi Universal.
Across the 12-nation euro zone, the Euro Stoxx 50 index fell 4.3 per cent to 2,996.3 points, close to a near-four-year low of 2,827.9 points reached last week.
In Paris the CAC 40 index tumbled 4.2 per cent to close at 3,735.7.
It was dragged down by Vivendi whose shares dived by as much as 40 per cent at one stage, following a debt downgrade and allegations by Le Monde newspaper that it had tried unsuccessfully to dress up its annual accounts. Vivendi denied the Le Monde report.
The British FTSE 100 index of leading shares lost 3.0 per cent to end at 4,546.8, and the German DAX 30 index gave up 3.91 per cent to 4,195.95.
The euro fell to 0.9813 dollars.
European markets' woes were compounded by another rout on Wall Street. The Nasdaq Composite fell 2.6 per cent in early trading, following a 4.1-per cent plunge the previous day, leaving the index at its lowest level in over five years.
The Dow Jones industrial average fell 1.2 per cent.
While US corporate standards have come under fire recently, things are not looking too rosy for some European corporate heavyweights either.
Nomura equity strategist Anais Faraj said investors are now "more and more convinced the accounting troubles we've seen in the US are going to become a major factor in Europe".
Shares in Vivendi ended down 25.5 per cent to 17.8 euros on concerns about the company's solvency after US credit ratings agency Moody's downgraded the group's long-term debt rating to junk-bond status.
That overshadowed news of the resignation of the company's controversial head Jean-Marie Messier.
The stock was rocked further by allegations in the Le Monde newspaper that Vivendi had tried to dress up its 2001 accounts with the complicity of its auditors but had been prevented from doing so by the French stockmarket authorities.
While the story was later denied by the company, that offered the stock only limited support.
"If any company was a leading candidate for a scandal it was Vivendi. What the market has done is shoot first and it will ask questions later," said Faraj.
Worries over French banks' exposure to Vivendi debt saw shares in BNP Paribas plunge 9.7 per cent to 50 euros, while Societe Generale stock fell 6.1 per cent to 62.9 euros.
Shares in France Telecom gave up early gains to fall 6.9 per cent to 11 euros, having risen by over a quarter the previous session on speculation that the company, which was partly privatised in 1997, might be renationalised if its share price remained depressed.
Among other technology losers, shares in Finnish mobile telephone maker Nokia dropped 5.6 per cent to 13.8 euros, while British mobile telephone operator Vodafone lost 6.3 per cent to 86 pence.
David Thwaites, European equity strategist at BNP Paribas, said that investors were hoping that corporate woes in Europe would not be on the same scale as those shaking the US.
"In the US there's been clear fraud in a couple of cases. The hope is that the European and the UK accounting system is a bit safer, a bit more robust.
"But that said, naval gazing in the US leads to inevitable problems" and worries that accounting irregularites could be uncovered in Europe, Thwaites said.
"Meanwhile you've worries about debt, corporate governance, executive remuneration and one or two high-profile instances of obvious problems.
"So I think Europe's got a milder but different stain of Enronitis," he added.
Other European markets closed lower. The SMI index of leading Swiss shares was off 2.03 per cent at 5,863.8 points, the Amsterdam AEX (-4.13 per cent) at 420.8, the Brussels Bel-20 (-2.50 per cent) at 2,472.65, the Madrid Ibex-35 (-2.61 per cent) at 6,713.4 and the Milan Mib 30 (-2.94 per cent) at 27,210.0. |
