EUROPE
Euro closes mixed
Posted Wed, 23 Jul 2008

European stocks closed mixed, coming off their lows in volatile trade as weaker oil prices helped offset fresh concerns about the US economic outlook after much worse-than-expected Wachovia bank results.

Dealers said sentiment was hit when Wachovia reported a second quarter loss of $8.66-billion as it wrote-off $6.1-billion to reflect further losses in the slumping US housing market.

The loss was more than five times the average Wall Street forecast and dashed hopes that the worst of the US subprime home loan crisis was over.

Downbeat guidance from the world's largest mobile phone company Vodafone and slumping results at Ericsson undercut the telecoms sector and added to the negative tone.

At the same time, a fall in the price of oil to below 130 dollars again provided some support and helped the markets recover some lost ground later in the day.

In London, the FTSE 100 index fell 0.74 percent to 5364.10 points but in Paris, the Cac 40 finished flat at 4327.26 points and in Frankfurt the Dax rose 0.28 percent to 6442.79 points.

The Euro Stoxx 50 index of leading European companies fell 0.23 percent.

The euro was at 1.5812 dollars.

The New York oil contract was down 4.63 dollars at 126.41 dollars.

In Asia earlier Tuesday, Japanese shares jumped 2.98 percent as investors there picked up on Wall Street's gains last week following a public holiday which kept the market closed on Monday.

Hong Kong and Sydney both closed virtually unchanged.

On Wall Street, stocks were whiplashed by the conflicting oil and Wachovia bank leads in early trade but by 4.15pm GMT, investors were more confident, with the Dow Jones Industrial Average up 0.46 percent.

Dealers said that after last week's solid gains made on the back of positive bank second quarter results, the figures from Wachovia were a cold reality check.

"The market has had a good run, up 3.7 percent since last Tuesday, in response to better-than-feared earnings results. The latest batch of results muddles the picture a bit and will provide a test of the newfound bullish sentiment," said Patrick O'Hare, analyst at Briefing.com.

Results from companies such as Apple on Monday were strong but guidance was cautious, reinforcing the message that the outlook is uncertain as the US subprime crisis continues to play out into the wider economy.

The telecoms sector was a feature on the Vodafone guidance — which cited Spain as posing problems, hitting sentiment there badly — and on Ericsson's 70 percent plunge in second quarter earnings.

"The Spanish and UK telecoms markets, resilient to the economic slowdown to date, finally look to have cracked," said Collins Stewart analyst Mark James in London.

"It seems likely that earnings expectations, regardless of management's statements, are likely to get scaled back."

In London, the overall downturn was attributed to Vodafone, which lost 16 percent at one stage before coming off its lows to finish 13.57 percent lower at 129 pence.

Ericsson meanwhile tumbled 11.05 percent to 66.80 kronor in Sweden.

Among the banks, Royal Bank of Scotland lost 1.97 percent to 199 pence and Barclays shed 2.85 percent to 314.75 pence.

British Airways jumped 3.03 percent to 246.25 pence as oil prices fell.

In Paris, dealers said strong interest in Suez Environnement, spun off in the GDF and Suez combine, helped steady the market after the Wachovia results.

One dealer said the fall in oil prices again to below 130 dollars per barrel could be signify there were now on a downward trend and that helped bolster the market.

GDF Suez lost 4.02 percent to 42.00 euros while Suez Environnement jumped 29.29 percent to 18.10 euros on their first day of trade.

Among the banks, BNP Paribas rose 0.43 percent to 63.04 euros but there were heavy losses elsewhere in the sector.

France Telecom shed 3.64 percent at 19.08 euros in the fallout from Vodafone and Ericsson.

In Frankfurt, Deutsche Telekom lost 4.42 percent to 10.59 euros after the Vodafone warning while lower oil prices helped the auto stocks — Volkswagen gained 2.68 percent to 196.02 euros and BMW was up 0.43 percent at 30.70 euros.

Elsewhere in Europe, the Bel-20 in Brussels lost 1.84 percent, the Ibex-35 was down 1.48 percent, Italy's Mib-30 rose 0.24 percent, the AEX 25 in Amsterdam slipped 0.04 percent and the Swiss Market Index added 0.93 percent.