Friday January 11, 12:03 PM
Euroshares extend losses midday, broker downgrades weigh on sentiment
LONDON (Thomson Financial) - Euroshares extended losses in midday trading with investors on a selling spree as several broker downgrades on consumer staples groups reinforced fears over a looming recession.
At 11.40 am, the DJ STOXX 50 fell 16.25 points or 0.46 pct to 3,537.98 as the STOXX 600 lost 1.98 points or 0.57 pct to 343.40.
Looking ahead, Wall Street is set to open with heavy losses on concerns about further potential and unexpected write-downs in the banking sector related to the crisis in the sub-prime mortgage market.
Merrill Lynch (NYSE: MER - news) is in focus following a report in the New York Times (NYSE: NYT - news) which said the bank is expected to suffer 15 bln usd in losses stemming from soured mortgage investments -- almost double its original estimate.
According to spread bettors IG Index, the Dow Jones Industrial Average is expected to open down 113 points at 12,740. Separately, S&P 500 futures were off 9.50 points at 1,411.50 while Nasdaq 100 (NASDAQ: news) futures dropped 6.75 points to 1,954.
Back in Europe, markets also extended earlier losses.
'There is a lot of pressure to sell today and although the US gains (overnight) helped initially, concerns over the economy persist,' one Frankfurt-based trader said.
Several downgrades on consumer staples groups did nothing to elevate the mood, indicating that even confidence in the demand for everyday products is under pressure.
Unilever (LSE: ULVR.L - news) lost 5.04 pct, after Morgan Stanley (SPU - news) cut its stance on the shares to 'underweight' from 'equal-weight', noting that short-term concerns for the group include potential volume impact from recent price increases and input-cost-related margin pressure, particularly in the first half of 2008.
Clarins (Paris: FR0000130296 - news) and L'Oreal (Paris: FR0000120321 - news) were cut to 'sell' from 'hold' at Deutsche Bank (Xetra: 514000 - news) and shed 4.42 pct and 4.09 pct respectively.
Danone (Paris: FR0000120644 - news) was down 2.64 pct after it was also cut to 'sell' from 'hold' in the ABN Amro HPC and food producers note.
And food producer Premier Foods (LSE: PFD.L - news) fell nearly 14 pct yesterday and as much as 19 pct today after its uninspiring update prompted fears the group will have to resort to a rights issue.
Dealers also noted rumours were circulating that Cadbury-Schweppes, down 3.47 pct, will issue a profit warning.
Elsewhere, Infineon (Xetra: 623100 - news) was in the spotlight, down 3.72 pct, following a downgrade of the sector by Credit Suisse to 'marketweight' from 'overweight'.
The broker said monthly integrated circuit unit growth is expected to peak in the first quarter of 2008 and noted that the sector has historically not performed well when IC unit growth peaks.
Weak results from Swiss-listed Austriamicrosystems last night as well as low expectations for the fourth quarter of Samsung (000830.KS - news) , due out on Tuesday, are also pressing on the stock.
Amongst outperformers this morning, British Airways (LSE: BAY.L - news) added 4.76 pct as traders reported rehashed talk that Middle Eastern peer Emirates was considering a bid, although some pointed to a note on the airline sector from SG securities which was more likely to be behind the share move.
Over in France, engineering group Alstom (Paris: FR0010220475 - news) rose 3.83 pct, buoyed by a recommendation upgrade from Goldman Sachs (NYSE: GS - news) to 'neutral' from 'sell' and a report of a major contract win to sell next generation high-speed trains to Italy.
Over in the banking industry, Northern Rock (LSE: NRK.L - news) gained 5.57 pct after the group said it had sold a mortgage portfolio to JP Morgan at a 2.25 pct premium to its book value.
German midcaps were in good form today with SGL Carbon (Xetra: 723530 - news) adding 9.66 pct after CEO Robert Koehler upgraded his full-year 2008 sales growth target to 10-15 pct from above 5 pct.
The company also said earlier it will invest about 200 mln eur in the expansion of its Malaysian graphite electrode plant, which is currently under construction.
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