European stocks under pressure from banks and telecoms (MarketWatch) (20-02-2008)

LONDON (MarketWatch) - The record high close of oil prices affected European stock markets along with the rest of the globe and share prices fell sharply on Wednesday morning more bad news came from the banking sector with Alliance & Leicester unveiling asset write downs and a gloomy outlook for 2008.

The pan-European Dow Jones Stoxx 600 index moved down 1.3% to 319.90, with banks among the worst performers.

Shares of Alliance & Leicester, a U.K. mortgage lender, fell 13.8% after it said its 2007 net profit fell 41% to 257 million pounds when factoring in a write-down of 185 million pounds on certain mortgage-linked assets. Core operating profit of 417 million pounds roughly met guidance given in January.

It also held its final dividend payout at 36.5 pence a share and said dividend for 2008 will probably be the same as 2007.

Other banks trading with losses included HBOS, down 2.5% and Deutsche Bank, down 1.3%.

Among major European markets, the U.K. FTSE 100 index slid 1.1% to 5,899.50, the German DAX 30 index fell 1.3% to 6,914.83 and the French CAC-40 index declined 0.9% to 4,840.47, although these losses were trimmed by half by mid-morning.

Telecoms were exerting pressure on markets, with Vodafone Group, the 45% owner of Verizon Wireless, down 3.1% after the U.S. mobile operator stepped up rate competition by unveiling a flat-rate calling plan. Other telecoms were also under pressure.

Meanwhile, data showed that German producer prices rose faster than expected in January, a sign of still bubbling inflation that could limit any rate easing from the European Central Bank.

The index of producer prices for industrial products posted a 0.8% rise from December, and increased 3.3% compared to January 2007, Germany's Federal Statistics Office reported Wednesday.

Shares of French bank BNP Paribas edged up 0.8% after the bank reported a 42% drop in fourth quarter net income to 1.01 billion Euros but managed to meet market expectations.

And shares in ING Groep NV rose 2.6% after the Dutch financial-services group, reported fourth-quarter net income rose 18% to 2.48 billion Euros, with underlying net income up 24% following a good performance from its insurance operations.

In other earnings news, shares in Anglo American dipped 1.6% after it improved its fiscal-year net income by 18% to $7.3 billion but said that revenue fell 7.7% to $35.7 billion. Anglo American also is delaying the sale of a construction-materials division.

Source: MarketWatch