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Europe tumbles to 5-year low
LONDON, England (CNN) -- European markets tumbled to five-year lows on Monday as investors fretted over the future of Germany's struggling economy after Chancellor Gerhard Schroeder won a narrow victory on Sunday. The election results clouded the outlook for much-needed reforms to the labour market and tax structure aimed at jump-starting the Europe's biggest economy. (Full story) It also raised concerns that the government could face a crisis because of the size of its mandate, with Schroeder's centre-left Social Democrats and Greens receiving a majority of just nine seats. (Full story) European markets were also pressured on Monday by a weak start on Wall Street as more fears surfaced over corporate profits and the health of the global economy. (More) Frankfurt's electronically traded Xetra Dax, which has fallen by as much as 40 percent this year alone, was down 3.5 percent to 2.958.39 in late trading (the German market was set to close at 1800 GMT). London's FTSE 100 lost 1.5 percent to 3,803.2 and the CAC 40 blue chip index in Paris fell 1.5 percent to 2,847.03.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 1.9 percent to -- its lowest level since 1997. The computer, insurance and information technology sub-sectors were among the biggest losers on Monday. "One is tempted to think the fall is on the back of the Gedrman elections given it's not the best of outcomes with such a narrow majority," Gareth Evans, European equity strategist at ING Barings, told Reuters. "Certainly [opposition candidate Edmund] Stoiber would have been better received by the market because of his plans for structural reform. The government has not got much of a majority so we can't expect much on reform going forward." Alcatel [PAR:PCGE], the world's fifth largest telecom equipment maker, plunged 14.81 percent to 2.30 euros after the Canadian-U.S. group JDS Uniphase, the world's largest supplier of fibre-optics equipment, lowered its first-quarter sales guidance. (Full story) On Friday, Alcatel announced more job cuts and issued a profit warning. France's STMicroelectronics [PAR:PSTM], Europe's biggest chipmaker, dropped 7 percent to 14.05 euros, while Germany's Infineon Technologies [FSE:FIFX] was down 12.2 percent to 6.56 euros in late Frankfurt trading. ASML, the Dutch semiconductor equipment maker, fell 11.2 percent to 6.18 euros. On Monday, it said it was sticking by its forecast for the second half of 2002, despite a string of earnings and ratings downgrades. (Full story)
Deutsche Telekom [FSE:FDTE], Europe's biggest phone company, was down 5.2 percent to 9.11 euros in late Frankfurt trading after taking control of Dutch mobile operator BEN on Friday for about 2 billion euros, including debt. German reinsurer Munich Re [FSE:FMUV2], which led declines in the insurance sector, was down 9.6 percent to 121.89 euros in late trading. Morgan Stanley cut its price target, citing concerns over the declining value of its equity holdings. Europe's biggest insurer Allianz [FSE:FALZ] was down 3.2 percent to 96.36 euros in late trading. BAE Systems [LSE:BA], Europe's biggest defence contractor, was flat at 189.73 pence after Britain's Observer newspaper said the company was in talks to sell 50 Eurofighter Typhoon warplanes to Saudi Arabia in a deal worth at least $1.5 billion. BAE denied it was in talks with Saudi Arabia. Oil stocks rose initially after Baghdad said it would reject any new U.N. resolution on weapons inspections, raising fears of disruption to crude supplies from the Middle East. Brent crude futures for November delivery jumped 60 cents to $29.03 in late London trading on Monday. However, stocks slipped lower in afternoon trading. BP [LSE:BP], Europe's biggest oil company, lost 1 percent to 437.85 pence, while Royal Dutch fell 0.2 percent to 40.86 euros and Shell Transport & Trading [LSE:SHEL] declined 1.4 percent to 377 pence. France's TotalFinaElf [PAR:PFP] was up 0.5 percent to 130.90 euros. BMW [FSE:FBMW], the German luxury carmaker, was down 1.2 percent to 33.70 euros in late Frankfurt trading even though investment bank UBS raised its rating on the stock to a "strong buy" from "buy" and set a share price target of 50 euros. Britain's Imperial Chemical Industries [LSE:ICI] sold it Synetix catalyst unit to rival Johnson Matthey [LSE:JMAT] for $260 million. The proceeds will be used to cut debt, the company said. ICI slipped 3.8 percent to 217.77 pence at midday after initially rising on the news. De La Rue [LSE:DLAR], the world's biggest printer of bank notes, dived 20.8 percent to 240 pence after the company issued a profit warning and said it would close a factory with the loss of 350 jobs. (Full story) Among the positive stocks on Monday was Beiersdorf [FSE:FBEI], the maker of Nivea skin products. It rose 12.2 percent to 96.50 euros on a report the U.S. consumer products giant Procter & Gamble [USA:PG] was in talks about buying a large stake in the German group. (Full story) The AEX index in Amsterdam fell 4.3 percent and Milan's MIB30 index lost 4.8 percent, while the SMI in Zurich declined 3.7 percent. In the U.S. on Monday, a revenue warning from JDS Uniphase and bearish analyst notes on software and semiconductors zapped stocks in early trading as investors also grappled with the escalating possibility of a war with Iraq. At 1430 GMT, the Dow Jones industrial average was down 172.42 points to 7,813.60, moving close to its July 23 low of 7,702.33. The Nasdaq composite declined 25.97 points to 1,195.12, while the Standard & Poor's 500 index gave back 16.17 points to 829.22.
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