European stock markets fell yesterday after a proposed mega merger beween EADS and BAE fell through and amid continued worries about the global growth outlook.
At the close, London’s FTSE 100 index of top companies ended the day down by 0.58 per cent at 5,776.71 points.
Frankfurt’s Dax 30 fell by 0.41 per cent to 7,205.23 points, while in Paris the CAC 40 gave up 0.50 per cent to 3,365.87 points.
In foreign exchange trading, the euro firmed to $1.2893 from $1.2881 late in New York on Tuesday. Gold prices slipped to $1,763 an ounce on the London Bullion Market from $1,774 an ounce Tuesday.
A merger to create the biggest aerospace group in the world between EADS and BAE Systems collapsed yesterday, with analysts saying Germany shot it down because the country feared it would be sidelined.
The two groups issued a statement announcing failure, and a source close to the talks said they fell through because of opposition from Germany. British takeover rules had given parties to merger and takeover talks 28 days from the initial announcement to make their position clear to market authorities in London.
EADS wanted to expand in the United States and gain better access to a civil aviation market which is forecast to grow in coming years, to boost its arms industry activities, and to broaden its cost base from euros into dollars, the currency of aviation sales.
In London deals, shares in BAE Systems finished 1.38 per cent lower at 320.9 pence, while EADS jumped 5.29 per cent to €27.48 in Paris.
US stocks dropped amid investor caution after Alcoa said that it saw aluminum demand falling as global economic growth slows.
In midday trade the Dow Jones Industrial Average was down 0.56 per cent, the S&P 500 slipped 0.25 per cent, and the tech-rich Nasdaq was lower as well, losing 0.26 per cent.
“US earnings season started in a reasonable fashion (after the close of Wall Street), as (US aluminium maker) Alcoa managed to beat expectations and record a small profit per share,” said Chris Beauchamp, analyst at IG trading group. “However, the company’s somewhat cautious outlook for the coming months chimes with the IMF’s downgrade to global growth... This goes some way to explaining why we are seeing further weakness in markets this morning.”
Traders were also closely tracking the latest developments surrounding the eurozone debt crisis.
“European equity markets are... failing to stage any kind of a rebound after two days of steep losses,” said ETX Capital trader Markus Huber.
“Exerting pressure on the markets are continuing worries that the global economy might be slowing further.”
Huber added that with Spain still not any closer to accepting an aid package, investors were becoming once more risk averse.
Global markets have enjoyed strong gains recently after the US, Japanese and European central banks unveiled monetary easing schemes to kickstart lending and jobs. But shares worldwide closed lower on Tuesday after the IMF cut its global economic growth forecasts and prior to the start of the US earnings season.