Stocks Shaky on More Turmoil in Brazil

It's wild out there, and it looks to get wilder.
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FRANKFURT -- It's been a wild morning in Europe, with stocks freefalling on the open, then clawing back up into positive ground before slipping down hard again after Brazil's real fell below its new trading band.

Fasten your seat belts, Wall Street.

The mood here continues to be dominated by Wall Street's plunge yesterday and Brazil's problems. But a resumption of merger fever helped -- at least for a while -- to counteract Brazil and emerging market jitters somewhat.

Among the biggest stories was news that Spain's

Banco Central Hispano

and

Banco Santander

were planning to merge in a share swap worth at least $11.8 billion. Trading was halted ahead of a joint news conference by the two banks this afternoon. Shares of Spanish banks, with large exposure to Latin America, suffered

huge losses Wednesday after Brazil devalued its currency.

In Frankfurt, the

Xetra Dax

was down 66 points, or 1.4%, at 4835; in London, the

FTSE-100

was down 13, or 0.2%, at 5806; and in Paris, the

CAC-40

was down 51, or 1.3%, at 3945.

Markets continue to be scared and very shaky, with today's midday foray by indices into positive territory repulsed by sellers eager to reduce stock exposure. Last week's New Year's rally gains have been wiped out this week, a painful experience for many investors who now like the feel of cash. That mood is highly charged here, and anything can happen when trading begins on Wall Street and in Brazil.

S&P 500

futures have been volatile overnight on both sides of unchanged, but were last down 8.00 points at 1211.00.

The dollar was weak today against the yen at 112.62 yen, but had recovered from early weakness against the euro, last bid at 1.1685. U.S. long bond prices were up again on flight-to-quality buying, with the yield at 5.02%.

Thomas Teetz, equities strategist at

HSBC Trinkaus

in Dusseldorf, says that the heavy losses this week have put stocks at attractive levels for investors with a mid- to long-term horizon. But the faint-hearted should be cautious. Markets most likely will be whipped around by Brazil news, earnings worries and further news of slower European economic growth.

"We are going to have very nervous markets in the next few weeks," he warned.

Among other merger news today,

Volvo

announced that it had bought a 12.9% stake in rival Swedish truck and bus maker

Scania

. Shares of Scania shot up 9.7%, while Volvo edged down 0.9%.

Also, the bidding war to buy

AirTouch

(ATI) - Get Report

is heating up further.

Bloomberg

reported that

Bell Atlantic

(BEL)

will try to beat

Vodafone's

(VOD) - Get Report

$54 billion offer for AirTouch. Shares of Vodafone in London were up 1.1%.