U.S. rate fear saps Europe stocks
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LONDON, England (Reuters) -- European blue-chips ended down on Wednesday, wary about the prospect of rising U.S. interest rates, with German chemicals company BASF and France's Rhodia in the firing line.
The Federal Reserve maintained its commitment to leaving rates low on Tuesday for a lengthy period and noted growth in the U.S. economy, but said the threat of falling prices had eased.
"Less concern about the risks of deflation is one step towards policy tightening at some stage," said Nigel Richardson, senior strategist at AXA Investment Managers.
BASF ceded 1.9 percent after it predicted global growth in the chemicals market to trail world economic growth until 2015.
Rhodia dived 15.7 percent after the Financial Times reported the company was under pressure from creditor banks to launch a 300 million-euro rights issue before they will back a debt-refinancing deal.
But Dutch retailer Ahold bucked the trend with gains of four percent on news that its $3.5 billion-euro rights issue was well-received and Fortis Bank saying it saw a 45 percent upside in the share price.
The FTSE Eurotop 300 index of pan-European blue chips closed down 0.80 percent at 932.67 points from a session high of 940.69 amid thin trade, while the narrower DJ Euro Stoxx 50 index fell 0.44 percent to 2,660.73.
Buying opportunities
Strategists said European equity markets could become more volatile as 2003 comes to a close. But they expect that the rally, which started after the Iraq war ended still has some way to go, even if U.S. interest rates are hiked.
U.S. interest rates are at 45-year lows of one percent. A 25 or 50 basis point hike is unlikely to cause any lasting damage to equity market sentiment.
"It would still be extremely accommodative," said Francois Lemoine, European equity strategist at BNP Paribas.
"The reference to briskly expanding output confirms that the recovery is on track and sustainable...any falls before end-2003 may well be buying opportunities."
On Wall Street, the Dow Jones industrial average was up 0.28 percent at 9,950.75 points, while the tech-laden Nasdaq Composite was little changed around 1,908.94.
The Frankfurt Dax closed down 0.66 percent at 3,820.92 led by losses of 5.6 percent in Deutsche Post after German state bank KfW said it was selling two billion euros of stock in the postal firm via a combined share placement and exchangeable bond sale.
Commerzbank slipped 2.9 percent after the German bank bought 4.5 million shares or nearly 20 percent in mid-sized Polish bank BRE during a public bid that ended last week, raising its stake to 70 percent.
The French CAC closed down 0.5 percent at 3,438.85 points, the Swiss SMI gave up 0.88 percent to 5,345.1 and London's FTSE ended down 1.01 percent at 4,335.4.
Amsterdam's AEX was a major European loser, down 1.34 percent to 327.76, with Dutch phone company KPN contributing losses of 9.3 percent as investors disappointed by its outlook dumped the stock.
KPN said business conditions were improving, but remained difficult and that it expected pre-tax profit to dip to 1.4 billion euros ($1.72 billion) next year from a projected 1.5 billion euros this year.
"Analysts were looking for a range between 1.4 and 1.7 billion euros," said Tom Muller, analyst at Insinger Townsley. "It was all too conservative."
Elsewhere Sanofi Synthelabo rose 1.7 percent on renewed speculation the French pharmaceuticals company will merge with bigger rival Aventis.
German car maker DaimlerChrysler gained 1.7 percent after Chief Executive Juergen Schrempp testified that the 1998 combination of Chrysler and Daimler-Benz was a merger of "two great entities on an equal basis."
Investors were heartened after Schrempp rejected fraud accusations by billionaire investor Kirk Kerkorian, who claims that Germany's Daimler-Benz dishonestly characterized a takeover as a merger.
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