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Europe tumbles as ECB holds rates
LONDON, England (CNN) -- European markets tumbled Thursday after the European Central Bank disappointed investors by keeping interest rates unchanged and quashing hopes of any near-term stimulus for the economy. London's FTSE 100 fell 1.6 percent to 3,928.9 and CAC 40 blue chip index in Paris lost 2.8 percent to 2,939.17, while Frankfurt's Xetra Dax was down 3.6 percent to 2,897.67 in late trading (the German market was set to close at 1800 GMT). The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 2.4 percent. Both the ECB and the Bank of England decided to leave the cost of borrowing on hold Thursday as they wait to see if past rate cuts can stimulate growth. (Full story) After the decision, the euro extended gains against the dollar to $1.142 -- near recent four-year highs. Because interest rates in Europe are higher than the U.S., investors are likely to move their money to where they can get better returns. But the strength of the euro can also hurt exports. As a result, many economist expect the ECB to trim rates next month. "I am disappointed they haven't cut interest rates as the macro case for it is very compelling. That means my expectations are simply rolled over. I expect them to deliver at the next June meeting as the data between now and then will cement the case,'' Ken Wattret, chief eurozone economist at BNP Paribas, told Reuters. Added David Brown, economist at Bear Stearns: "The eurozone stock market could use some help from lower ECB rates given some more disastrous German data yesterday on unemployment and orders." German industrial orders plunged 3.9 percent in March and the jobless numbers rose for the 13th straight month. In corporate news, KLM, Europe's fourth-largest airline, dropped 9.1 percent to 6.62 euros after posting a net loss of 416 million euros ($472.7 million) as global demand declined due to the war in Iraq, economic gloom and the SARS virus. (Full story) Danish brewer Carlsberg tumbled 8.8 percent to 223.50 crowns after first-quarter profit plunged 96 percent. The company lowered its outlook for the year. Vivendi Universal (PEX) lost 4.7 percent to 13.80 euros. The Guardian newspaper said a group of investment banks would sell up to two billion euros of the media company's stock within the next few days. British bank Barclays (BARC) fell 4.2 percent to 407.25 pence after agreeing to buy Spanish bank Banco Zaragozano for 1.14 billion euros. (Full story) ABN AMRO lost 5.1 percent to 14.12 euros after the Dutch financial services company ING said it would sell a five percent stake in ABN to cut its exposure to the stock market and strengthen its capital. But German luxury car maker BMW (FBMW) was up 0.8 percent to 28.31 euros in late Frankfurt trading. Its pretax profit fell 18 percent to 830 million euros as it spent more money on new models, but the figure was at the top end of expectations. (Full story) The AEX index in Amsterdam fell 2.5 percent and Milan's MIB30 index dipped 1.4 percent, while the SMI in Zurich fell 2.4 percent. In the U.S. on Thursday, stocks were little changed in midday trading as investors took a break after pushing the major indexes sharply higher earlier in the week. At 1530 GMT, the Dow Jones industrial average was down 14.93 points to 8545.70 and the S&P 500 index slipped 2.64 points to 926.98, while the Nasdaq composite lost 4.93 points to 1501.83.
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