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Europe wilts before U.S. rate move
LONDON, England (CNN) -- European markets closed lower on Wednesday after initial gains, buoyed by Swiss Life and BNP Paribas, were wiped out as investors headed for the sidelines to await a decision on U.S. interest rates. London's FTSE 100 fell 1 percent to 4,103.7 and the CAC 40 blue chip index in Paris lost 1.1 percent to 3,212.86, while Frankfurt's electronically traded Xetra Dax was down 1.5 percent to 3,301.8 in late trading (the German market was set to close at 1900 GMT). The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 1.1 percent, led lower by the information technology and automobile sub-sectors. Most analysts expect the Federal Reserve to cut its key lending rate by a quarter-percentage point to 1.5 percent later on Wednesday. The central bank will announce its rate decision at about 1915 GMT. But some said a rate cut may not be enough to cheer investors and settle volatile markets. "It's a question of whether or not people believe a rate cut will get us out of this rut... There are political problems -- the beating of the war drums -- which need to be resolved," one London trader told Reuters. The Bank of England and the European Central Bank meet to decide interest rates on Thursday, with some analysts saying the banks may follow any move by the Fed. In addition to interest rates, European investors had plenty of corporate news to digest on Wednesday. Swiss Life rose 8.7 percent to 165.25 Swiss francs after it ousted Chief Executive Roland Chlapowski and turned to Credit Suisse veteran Rolf Doerig to rescue the firm from a deepening crisis over accounting errors and management perks. (Full story) BNP Paribas (PBNP), the eurozone's largest bank by market value, gained 1.6 percent to 42.60 euros even as it posted a 23 percent drop in profit. But its numbers were broadly in line with expectations and it reassured investors with no nasty surprises. (Full story) However, Lufthansa (FLHA), Europe's third-biggest airline, gave up early gains after posting nine-month operating profits that beat its own full-year target. Its stock was down 1.9 percent to 12.50 euros in late Frankfurt trading, after starting up more than 4 percent. (Full story) BMW (FBMW), the world's No. 2 luxury carmaker, posted a profit in line with expectations, although its shares were down 7.9 percent to 33.75 euros in late trading. (Full story) Meanwhile, Vivendi Universal (PEX), Europe's biggest media company, gained 3.1 percent to 13.51 euros on hopes Belgian operator Belgacom could join forces with Vivendi to take control of telecom group Cegetel or force Vodafone to make a bigger bid for Vivendi's 44 percent stake in the French group. Vodafone (VOD), Europe's biggest mobile phone operator, said later on Wednesday it was renewing a 6.77 billion euro ($6.74 billion) cash offer for Vivendi's Cegetel stake. (Full story) Vodafone shares were down 3.5 percent to 102.75 pence in London. The AEX index in Amsterdam fell 1.4 percent, the SMI in Zurich lost 0.6 percent, while Milan's MIB30 index fell 1 percent In the U.S. on Wednesday, a Republican sweep of Congress and the resignation of SEC chairman Harvey Pitt left stocks little changed in early trading, as investors awaited the Federal Reserve's interest rate decision. At 1515 GMT, the Nasdaq composite was up 7.28 points to 1408.45, while the Dow Jones industrial average gained 29.69 points to 8707.96 and the Standard & Poor's 500 index added 2.12 points to 917.51.
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