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Europe hit by Wall Street woes
LONDON, England (CNN) -- European markets slipped into the red on Thursday as enthusiasm for a rate cut by the European Central Bank gave way to concerns over struggling U.S. airline giant UAL and early declines on Wall Street. London's FTSE 100 ended 0.4 percent lower at 4,093.6 and the CAC 40 blue chip index in Paris fell 1.3 percent to 3,158.04, while Frankfurt's electronically traded Xetra Dax was down 3.2 percent to 3,214.98 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. The computer, insurance and automobile sub-sectors were among the biggest losers, while tobacco and beverage stocks notched up strong gains. The shine began coming of European market as Wall Street turned lower amid concerns UAL, the parent of United Airlines, was heading bankruptcy after a U.S. government panel voted against an application for $1.8 billion in federal loan guarantees. (Full story) Earlier in the session, investors cheered the ECB's move to shore up the euro zone's flagging economy by cutting interest rates by half a percentage point -- the first rate change in more than a year. The key lending rate was lowered to 2.75 percent from 3.25 percent. (Full story) The Bank of England said on Thursday it would not lower its key rate. That decision was also widely anticipated and had little impact on the markets. (Full story) The ECB rate cut decision as a necessary move to increase spending among business and consumers, and thereby bolstering Europe's flagging economy, which has fared far worse than the UK. They were also relieved the central bank met expectations for a strong half-point cut, rather than a quarter-point reduction that some analysts had warned could be a possibility. "There is a multiplicity of reasons why the ECB has eased again and by so much," David Brown, Chief European Economist at Bear Stearns, wrote in a note to investors. "Critically the euro zone fundamentals have been crying out for lower rates for quite some time, with growth momentum slowing in the EMU area, Germany close to a double dip recession and inflation set to slow dramatically next year." The ECB inspired gains followed an earlier boost from the French government, which said late on Wednesday it would give France Telecom 9 billion euros as part of a massive restructuring programme to cut debts of 70 billion euros. (Full story) France Telecom (PFTE), Europe's second-largest phone company, soared 16.5 percent to 18.90 euros, while its mobile phone unit Orange (PORA) gained 1.4 percent to 7.29 euros after it said it was delaying the roll out of high-speed networks in Europe. Deutsche Telekom (FDTE), another former monopoly fighting ballooning debt problems, was up 0.7 percent to 12.39 euros in late Frankfurt trading, off its highs for the session. BT Group (BT), which has already cut billions of its debt mountain, gained 0.9 percent to 197.53 pence, also off its highs. Among the biggest losers on Thursday was EADS (PEAD), which owns 80 percent of Airbus. It fell 6.7 percent to 11.45 euros after the German Defence Ministry said it would cut planned purchases of military aircraft. Leading the insurance sector lower was Munich Re (FMUV2), Europe's largest re-insurer, which was down 6.5 percent to 130.90 euros in late Frankfurt trading. The UK's Friends Provident (FP) lost 6.6 percent to 131.54 pence and Prudential (PRU) fell 5 percent to 491.88 pence. Six Continents (SXC), which runs Inter-Continental, Crowne Plaza and Holiday Inn hotels, fell 0.2 percent to 543 pence after it posted a 24 percent fall in annual profits and warned it was more cautious on its hotel prospects for 2003 than it was in late September. (Full story) The AEX index in Amsterdam fell 1.1 percent and Milan's MIB30 index lost 2.1 percent, while the SMI in Zurich declined 1.2 percent. In the U.S. on Thursday, stocks drifted lower in early trading as blue chips declined after a setback for struggling UAL, despite some signs of improvement in the labour market. (Full story) At 1530 GMT, the Dow Jones industrial average was down 65.54 points to 8672.31, while the Standard & Poor's 500 index lost 4.88 points to 912.70 and the Nasdaq composite declined 1.22 points to 1429.13.
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