Loan problems in U.S. rattle Europe markets
FRANKFURT: European stocks fell Monday after four straight sessions of gains, as New Century Financial, a U.S. lender specializing in high-risk home loans, said it lacked cash to pay its creditors, rattling investor confidence.
"The difficulties in the U.S. subprime mortgage market contain all the classic ingredients of a possible credit crunch" that could lower global liquidity, said Jorma Korhonen, manager of the $5.6 billion Special Situations Fund at Fidelity International in London. "We will continue to monitor the situation very closely as it unfolds."
UBS, the biggest Swiss bank, and Société Générale, one of the top three in France, paced financial sector declines. UBS slid 0.95 Swiss franc to 70.75 francs, and Société Générale fell €1.21 to €127. Total, the largest European oil refiner, led energy producers lower, sliding 49 cents to €50.04 as oil prices fell for a third day.
The British retailer J Sainsbury dropped sharply on speculation that a group of buyout firms might scrap a planned takeover. Sainsbury ended 12 pence lower at 532 pence. The shares have climbed 30 percent this year, the best performance in the Stoxx 600 retail index, which has gained 6.9 percent in the period.
The stock, which closed Friday at its highest price since 1998, may be too expensive for CVC Capital Partners, Kohlberg Kravis Roberts and Blackstone Group to make a sufficient return, while KKR may not invest in more than one British retailer after bidding for Alliance Boots last week, analysts and investors said.
Bid drives up Boots stock
The Stoxx 600 lost 1.86 points to 365.49. The Stoxx 50 dropped 24.28 points to 3,651.04, and the Euro Stoxx 50, a gauge for the 13 countries sharing the euro, fell 24.89 points to 4,066.78.
National benchmarks dropped in 14 of the 18 West European markets. The CAC 40 in France fell 41.77 points to 5,496.07, while the DAX in Germany fell 1.03 points to 6,715.49. The FTSE 100 in London slipped 11.90 points to 6,233.30.
E.ON, which is bidding €41 billion for the Spanish energy utility Endesa, lost ground after Enel of Italy said it was buying an additional 2.98 percent in Endesa. Enel has said it does not intend to tender its stake to E.ON. Both Enel and Endesa gained on news of the additional purchase.
Shares of Alliance Boots, the largest British drug store chain, jumped to an eight-year high after Kohlberg Kravis Roberts and an Italian billionaire, Stefano Pessina, offered to buy the company for £9.7 billion. Alliance Boots rejected the proposal as too low.
Shares of the company, formed last year from the merger of Alliance Unichem and Boots Group, surged 14 percent Friday after it said it had been approached, without disclosing the bidder or the price.
Chemical makers rise
Akzo Nobel, a Dutch chemical and pharmaceutical manufacturer, rose strongly after saying that it would sell Organon BioSciences, which produces Marvelon birth-control pills, to Schering-Plough of the United States for €11 billion.
Imperial Chemical Industries, the largest British specialty chemical maker, also rose. "ICI now looks very vulnerable to a bid from Akzo," said Andrew French, a sales trader at E*Trade Securities in London.
A spokesman from Akzo Nobel declined to comment on the speculation.
Shares of FastWeb, the largest Italian fixed-line operator, soared 15 percent to €48.18 after Swisscom bid €3.7 billion in cash for the company. FastWeb described the offer as friendly, and Chairman Silvio Scaglia said he would sell his 19 percent holding unless there were "competing higher offers."
Smith & Nephew rose on news that the company, the largest European maker of knee and shoulder implants, had agreed to buy Plus Orthopedics Holding for 1.086 billion Swiss francs in cash and debt.
Shares of Balfour Beatty, the biggest British construction company, suffered their sharpest fall since May after Morgan Stanley said it would sell as much as £21 million worth of shares in the company.
Morgan Stanley is offering 4.5 million shares for 464 pence to 466 pence each, according to an e-mail message sent to clients. Sebastian Howell, a spokesman in London for Morgan Stanley, declined to comment.