Sun, Jul 25, 2004 - Page 10 News List

Europe weakens on US concerns

SUMMER SLUMPTraders said it could be September or later before there is a chance of a sustained rally as investors worry about a potential peak in earnings in the second quarter


A woman and man pass by the headquarters of the Abbey National Bank in London on Friday. Abbey National is in takeover talks with Banco Santander Central Hispano, Spain's largest bank. The Spanish bank said it would hold a board meeting today to evaluate a potential bid for Abbey National, Britain's second-largest mortgage lender.


European stock markets ended the week mostly lower on Friday after a weak opening on Wall Street sapped investor sentiment.

Traders are cautious about any sustained gains for equities.

"Any bounce in the markets in the weeks ahead is more likely to trigger selling than mark a new uptrend," said Anais Faraj, analyst at Nomura Securities.

"For a breakout on the upside, we might need to wait until September and the third quarter numbers," he added, noting that cash clearly has plenty of appeal versus equities, perhaps for most of the summer.

In London the FTSE 100 index bucked the weaker trend, gaining 0.46 percent to close at 4,326.3 on the back of news that Spanish bank SCH was considering a takeover bid for British bank Abbey National.

But in Paris the CAC 40 shed 0.16 percent to finish at 3,567.29, while in Frankfurt the DAX gave up 0.10 percent to end the session at 3,797.33.

The DJ Euro Stoxx 50 index of leading eurozone shares sagged 0.26 percent to 2,673.44 points.

European shares retreated from early gains in afternoon trading on Friday after Wall Street opened on a weaker note.

"The market has turned sour this afternoon and followed the pattern in the US, which is weaker," a Delta Lloyd dealer in Brussels commented.

J.P. Morgan strategists noted that investors are continuing to fret over a potential peak in earnings momentum in the second quarter and slowing earnings growth going forward.

"With 80 percent of the second-quarter reporting still to come, we will wait to see the final numbers before revisiting our operating EPS estimates for 2005,'' they said in a note on Friday.

They added that although US Federal Reserve Chairman Alan Greenspan sent a green light about the US economic outlook during his semi-annual testimony on Capitol Hill last week, markets are likely to wait for confirmation of his message in the data.

Eyes were on British bank Abbey National after the home-loan specialist said it had received a takeover approach from an unnamed suitor "which may or may not lead to an offer being made for the company."

Spanish bank SCH later revealed it was interested in buying Abbey National, putting an end to ongoing speculation.

SCH said it would meet today "to evaluate the opportunity to take a decision with regard to Abbey National."

Abbey National's shares soared 17.65 percent to ?.80 but SCH's shares were suspended ahead of the announcement in mid afternoon trading, down 4.2 percent at 7.99 euros.

AstraZeneca won 1.43 percent to ?4.11 amid positive broker comment following the drug maker's better than expected interim results posted on Thursday.

In Frankfurt VW shares advanced 0.86 percent to 32.93 euros after the German auto giant unveiled consensus-beating first-half sales and operating profit.

"The market likes VW's results. Well, at least the earnings were not as bad as had been expected," said one dealer in Frankfurt.

Elsewhere in Europe, Madrid's Ibex-35 shed 1.01 percent to 7,845 points, Amsterdam's AEX dipped 0.09 percent to 324.68, Brussels Bel-20 slipped 0.30 percent to 2,415.52 and Milan's Mib 30 nudged down 0.07 percent to 27,282.

In Switzerland, however, the SMI index gained 0.09 percent to 5,482.

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