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Europe closes in retreat
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January 28, 2000: 1:39 p.m. ET
U.S. data fans fear of rate hikes; only Paris, Stockholm buck downward trend
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LONDON (CNNfn) - London, Frankfurt and Swiss markets ended about 1 percent lower Friday, surrendering early-session gains after strong U.S. growth and labor-cost data fanned fears of an interest rate hike at next week's U.S. Federal Reserve meeting. For the week, all the big-four markets were up, except for Zurich.
Paris bucked the downtrend Friday in Europe and on Wall Street, rising modestly on the back of a surge in blue-chip utility Suez Lyonnaise des Eaux.
The euro was trading at 97.70 cents late Friday, having earlier plumbed another record low almost three cents below parity with the dollar. The currency received modest support earlier in the day from top European Central Bank officials, but ended the trading day on a weak note, up slightly from a lifetime trough of 97.39. The euro currently stands around 16 percent below the level at which it was launched in January 1999, and some economist believe it could fall as low as 90 cents.
London's benchmark FTSE 100 closed down 65.4 points, or 1 percent, at 6,375.6, led by losses in telecoms and banks. The decline was prompted by renewed concern over rates, following the release of stronger-than-expected U.S. employment costs and GDP numbers. Profit-taking kicked in after in-line U.K. growth data for the fourth quarter of 1999 supported economists' expectations for more impending rate hikes by the Bank of England. The FTSE 100 was up 0.46 percent, or 29.3 points from last Friday's close.
The electronically traded Xetra Dax in Frankfurt finished 0.8 percent lower, at 7.066.60. It ended the week 1.05 percent higher. In Paris, the blue-chip CAC 40 closed 0.75 percent higher Friday, at 5,731.05 - adding 0.8 percent for the week -- buoyed by deals in the telecommunications sector. The SMI in Zurich shed 1.2 percent to 7,029.6, and lost 2.8 percent for the week.
The OMX gauge in Stockholm, bucking the pattern Friday, shot up 2.6 percent on a strong advance by wireless heavyweight Ericsson after strong earnings. Ericsson gained 9 percent to close at 629 Swedish crowns.
The FTSE Eurotop 300, a pan-European index that reflects the overall regional mood, edged down 2.32 points to end at 1,528.59.
An early sharp slide Friday on the Dow Jones industrial average dogged European markets in the later stages of the day after many investors had anticipated a higher opening. The Dow was down almost 100 points when the FTSE 100 closed.
U.S. GDP and employment cost data revealed robust momentum in the U.S. economy. Taken together, the numbers may provide a reason for Fed hawks inclined to move on interest rates when the Federal Open Market Committee meets next Tuesday. The numbers sparked a sharp tumble on the Dow.
Swooning over Suez
In Paris, the major drama of the day was provided by diversified utility and media conglomerate Suez Lyonnaise des Eaux (PLY) after the company outlined plans to beef up its telecom activities, including the launch of a cellular operation. Suez stock leapt 9.4 percent to 152.1 euros.
Vivendi (PEX), which combines telecom, media and waste management businesses, ended 1.5 percent higher amid continued speculation that it had suspended talks with German-based Mannesmann (FMMN) but might consider possible deals with British Telecommunications (BT-A) or Vodafone AirTouch (VOD). Vivendi's chairman, Jean-Marie Messier said Friday that any alliance with another European group would couple Internet and telecom activities under a single umbrella.
Vodafone shares closed 0.7 percent lower as the intrigue surrounding its hostile takeover bid for Mannesmann remained at full boil. The Germany company ended 0.3 percent down after saying Friday it planned to form a tele-commerce venture with Deutsche Bank (FDBK), which saw its shares finish down 0.8 percent. The move came as Mannesmann tried to fend off a $148 billion hostile bid from Vodafone by making its shares prohibitively costly. Earlier reports said Mannesmann is in talks to buy a stake in AOL Europe, the Internet service joint venture.
Television broadcaster BSkyB (BSY), which is 40-percent owned by Rupert Murdoch's News Corp., shot up 11.2 percent, the best blue chip performer of the day, after France's Vivendi denied a report in the British press that it planned to sell its 25 percent stake in the company.
Banks fell sharply in London after the U.S. GDP report stoked worries about interest rates. HSBC Holdings (HSBA) shed 1.8 percent, Lloyds (LLOY) fell 4.3 percent, Barclays (BARC) gave up 3.9 percent and Standard Chartered (STAN) skidded 5.7 percent.
An official report showing the U.K. economy grew at a 0.8 percent in the fourth quarter of 1999, matching the pace set in the previous quarter, lent credence to economists' forecasts of more short-term rate hikes ahead by the Bank of England.
In Frankfurt, index heavyweight Deutsche Telekom (FDTE) tumbled 4.8 percent, handing back gains from Thursday's session after the telecom giant said it would sell its stake in the troubled Global One communications venture. Automaker BMW (FBMW) shot up 3.2 percent, aided by the euro weakness, which is seen as a potential boon to export-heavy companies. Volkswagen (FVOW) rose 0.3 percent, but DaimlerChrysler (FDCX) fell 2.4 percent. 
--from staff and wire reports
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