Stocks Sink Despite Merger News

A long list of announcements boosted individual stocks but not European markets.
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FRANKFURT -- After spurting higher on the open, the stock market quickly turned cautious after last week's huge gains, and most indices slid into negative territory.

The overall market weakness came despite a long list of merger news that boosted some individual shares. Near the top that list was an announcement that

British American Tobacco

was buying

Rothmans

in a $7.5 billion stock swap from Swiss firm

Richemont

and South African firm

Rembrandt

. Shares of BAT surged 13%.

Also,

Lasmo

and

Enterprise Oil

confirmed they were in merger talks. In London, Lasmo jumped 12.2%, while Enterprise fell 0.7%.

In Frankfurt, the

Xetra DAX

was down 69 points, or 1.3%, at 5301; in London the

FTSE-100

was down 59, or 1.0%; at 6087, and in Paris the

CAC-40

was down 45, or 1.1%, at 4200.

Several names in the telecom sector, among the biggest gainers last week, were among the biggest losers today. In Paris,

Alcatel

fell 5.4% and in London

Cable and Wireless

dropped 3.2%.

In Frankfurt, banks were weak, with

Dresdner Bank

down 3.5% and

Commerzbank

down 3.1%. And retailer

Metro

fell 5.1% on a downgrade. In Paris, a couple of auto-related names bucked the trend, with

Michelin

, up 5.4%, and

Renault

up 1.8%.

Some traders said the European market was hurt by Brazil jitters and on dollar weakness against the yen. Traders here also were fretting that Wall Street, after record highs last week, might be due for an ugly downward correction, which would most likely drag Europe lower.

S&P 500

futures were down 0.80 of a point at 1286.20, off the overnight session high of 1294.20.

But others maintained that today's losses were mainly technical after last week's huge gains.

Nick Glydon, technical analyst at

Robert Fleming Securities

in London, is one of those, and believes stocks are simply consolidating. He said institutions are cash-heavy and will provide strong buying support under current levels. "I think the market is going to roar to the upside again," he said.

The dollar was ailing against the yen, last bid at 108.91, but near flat at 1.1589 euros. U.S. long bond prices were down on dollar/yen weakness, last yielding 5.29%.

In other merger news,

Volvo

today confirmed it was in talks with

Fiat

, but provided no details. Volvo, which rose sharply last week, today was down 4.1%, while Fiat was up 0.2%.

And in a U.S. deal that would have ripple effects in Europe, telecom equipment maker

Lucent

(LU)

was discussing buying computer networking firm

Ascend

(ASND) - Get Report

for more than $16 billion, according to a

Reuters

story quoting unnamed industry sources.