Autos pace decline in Europe before Fed decision

Jan.30, 2008 in Market Outlook

European shares modestly lower ahead of Fed

UBS reveals higher-than-expected write down, BNP Paribas profit falls 42%

By Sarah Turner, MarketWatch

Last Update: 3:46 AM ET Jan 30, 2008

LONDON (MarketWatch) - European shares lost a bit of ground on Wednesday as
nervousness ahead of an interest rate decision from the U.S. Federal Reserve, new
write-downs from banking groups UBS and BNP Paribas and a negative note on the
auto sector hurting stocks.

The pan-European Dow Jones Stoxx 600 index (ST:SXXP) moved down 0.7% to 322.20,
dragged lower by auto-related stocks after downgrades by Goldman Sachs. Michelin
(FR:012126) lost 3.7% after the tire maker was downgraded to sell and Volkswagen
(DE:766400) fell 1.7% after it was cut to neutral.

Shares in Swiss banking group UBS (UBS)(CH:002489948) moved down 0.5% in Zurich
after it said that it will report a net loss of around 12.5 billion Swiss francs
($11.4 billion) for the fourth quarter, after higher-than-expected write-downs
from its U.S. mortgage exposure.The group said write-downs in the quarter will
total around $14 billion, with $12 billion coming from positions related to the
U.S. subprime market and the rest from other holdings linked to U.S. residential
mortgages.

Meanwhile, shares in French bank BNP Paribas (FR:013110) fell 1.8%. The firm said
that it expects its fourth quarter profit to fall around 42% to 1 billion euros
in the face of a “deepening crisis” for the financial sector.

Of national indexes, the French CAC-40 index (FR:1804546) slipped 0.8% to
4,899.74, the German DAX 30 index (DX:1876534) moved down 0.5% to 6,862.18 and
the U.K. FTSE 100 index (UK:UKX) lost 0.7% to 5,846.20.

U.S. stocks closed with solid gains on Tuesday, fueled by expectations of another
interest-rate cut on Wednesday from the Federal Open Market Committee. See
Tuesday’s Market Snapshot.
Click for Detail

The Federal Open Market Committee will reveal its decision after the European
close amid wide expectations the central bank will cut its target Federal funds
overnight lending rate by a half-a-percentage point to 3.0%. See Fed story.
Click for Detail

Elsewhere, shares in German software giant SAP (SAP)(DE:716460) moved up 3.5%
after it the firm said it expects software revenue outside a write-down related
to Business Objects to climb by between 24% and 27%, after 13% growth in 2007.

Adjusted operating margin is expected in a range of 27.5% to 28% after 27.3%
margins in 2007.

The company had earlier guided on fourth-quarter results, with net income down 6%
to 756 million euros, while revenue grew 10% to 3.24 billion euros. For 2008, SAP

Turning to deal news and shares in French electricity generator EDF (FR:EDF)
weakened 0.6% after a report that it, together with Spanish construction giant
ACS (ES:016705091), is considering a joint bid for Iberdrola (ES:0144580Y1),
Spain’s biggest utility. See full story.

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