Reply #59: Bourses closed in much the same state as at this morning's opening [View All]

Swiss SMI down -0.67% at 7864.26 in Zurich17:31:54
CAC 40 closes down -0.4% at 4,992.2 in Paris 17:47 CET
Xetra Dax 30 closes down -0.3% at 5,739.3 in Frankfurt 17:46 CET
FTSE 100 closes down -0.6% at 5,862.7 off intraday lows as media stocks rise but can’t off set weaker miners and banks 16:36

FTSE 100 to be reclassified based on tonight’s closing prices - DMGT and Cable & Wireless could face relegation, Corus and Lonmin could be promoted 16:40

European shares drop on rates despite late rally
Tue Mar 7, 2006 5:07 PM GMT PARIS, March 7 (Reuters) - European shares fell on Tuesday as investors focused on the potential for further interest rate hikes on both sides of the Atlantic, while Anglo American (AAL.L: Quote, Profile, Research) led a slump in mining stocks, outweighing gains late in the session by Linde (LING.DE: Quote, Profile, Research) and Telecom Italia (TLIT.MI: Quote, Profile, Research).

"There's been a cooling off in the U.S.," said Edmund Shing, European Strategist with Kepler Equities in Paris. "Bond markets are pricing in the danger of a bit more inflation and the Fed may have to raise rates more, and the same is true with the ECB in Europe," he said. "Consumers will be squeezed with higher interest rates, which is not good news for the market generally," Shing said.

The FTSEurofirst 300 <.FTEU3> index of leading European shares was down as much as 1 percent in mid-afternoon trade, but recouped some losses on the back of a late rally, to be down 0.5 percent at 1,343.6 by the unofficial close.

On Wall Street, the Dow Jones industrial average <.DJI> was 0.2 percent higher at 10,980 at the time of late European trade, after closing lower the previous session. "These prices have not been seen since mid-2004, when the Fed Reserves began the first of a long series of rate hikes," said Neill Pickering, head of group sales and trading at Pacific Continental Securities. "This has spooked investors -- who are biting their nails in dire straits that the magical 5 percent will not be the cut off point for the Feds and there could well be more hikes," he said.

The European Central Bank's (ECB) indication last week that rates will keep rising, along with the Bank of Japan's shift toward scrapping its loose monetary policy, has rattled Treasuries and global bond markets. "We believe the hawkish hints coming from the ECB and the potential time constraints posed by the prospect of softer fundamentals further ahead mean the race is on to get rates up as soon as possible," said David Brown, chief European economist at Bear Stearns.

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