European stocks declined as Volkswagen AG led the auto industry lower amid rising concern about employee strikes. DaimlerChrysler AG and Renault SA, two other carmakers, also fell. ``The car market is very uninspiring and it pays to be cautious on these stocks,'' said Boris Boehm, a fund manager at Hamburg-based Nordinvest who helps oversee the equivalent of $981 million in European equities. ``These companies are trying to cut costs, but in Germany they are in the hands of very strong unions.''
Carmakers are trying to trim labor and production costs and give incentives to clients in an effort to revive demand in Europe. Volkswagen last month cut its 2004 earnings target because of ``weak demand.'' Auto stocks are the worst performing group among the 18 on the Dow Jones Stoxx 600 Index this month. The Stoxx 50 declined 0.1 percent to 2651.61 as of 12:17 p.m. in London. The Stoxx 600 slipped 0.1 percent. The Euro Stoxx 50, a measure for the 12 countries using the euro, fell less than 0.1 percent. Trading is lighter than usual today as U.K. markets are closed for a holiday. Benchmark indexes slipped in 12 of the 17 Western European markets that were open. France's CAC 40 Index fell less than 0.1 percent and Germany's DAX Index shed 0.3 percent. September futures on the Euro Stoxx 50 shed 0.4 percent.
Low Trading Volumes
Trading in DAX shares today was 16 percent of the average daily volume in the past six months, Bloomberg data show. About 14 percent of the average daily volume of CAC 40 shares exchanged hands today. ``It will be a mixed day,'' said Borja Llari, part of a team that manages the equivalent of $1.1 billion at Arcalia Patrimonios in Madrid. ``There is low volume.'' He said benchmarks may be poised for a short-term drop after gains in the past two weeks. The Stoxx 50 is set to finish August little changed from the end of July, after concerns that rising energy costs would erode corporate profits eased in recent sessions. Oil traded at $43.47 a barrel in New York, down 10 percent from the record close of $48.37 reached on Aug. 20.
Volkswagen, Europe's largest carmaker, fell 1.7 percent to 31.74 euros. Workers' union IG Metall is considering protests to help convince management at Europe's largest carmaker to agree to a 4 percent wage increase in upcoming negotiations, daily Die Welt reported, citing a union negotiator. Volkswagen may be ejected from the Euro Stoxx 50 in a regular revision of the benchmark Wednesday, according to analysts including Nick Vassilos at ABN Amro Holding NV. Today's decline increases the company's chances of falling from the benchmark as Stoxx Ltd. uses market value as a selection criteria for the index. The stocks that leave major benchmarks often decline as fund managers that track the index have to sell them.
DaimlerChrysler
DaimlerChrysler, the world's fifth-biggest carmaker, fell 1.3 percent to 34.35 euros. Its Smart unit probably won't reach its full-year sales target of more than 170,000 vehicles because of the aging Smart Fortwo model, weekly Automobilwoche reported. Carmakers were the worst-performing group among 18 industries on the Stoxx 600, falling 1.1 percent. They led gains last week, when the benchmark added 3.1 percent. Sanofi-Aventis SA, the world's No. 3 drugmaker, added 0.9 percent to 59.10 euros. A 1,507-patient clinical trial presented Sunday at the European Society of Cardiology meeting in Munich showed Sanofi's experimental anti-craving pill, rimonabant, helped control obesity, one of the biggest risk factors for heart disease. Two other studies showed Sanofi's arrhythmia drug, dronedarone, safely prevented irregular heartbeats.
TUI, UBS
TUI AG, Europe's largest travel company, dropped 1 percent to 15.47 euros. WestLB AG, Germany's No. 3 state-owned bank, said it is in ``serious'' talks to sell its 31.3 percent stake in TUI. The bank plans to sell the stake this year ``if possible.'' UBS AG, Europe's biggest bank, shed 0.5 percent to 86.80 Swiss francs. The bank may announce today it's buying Charles Schwab Corp.'s institutional research and trading unit for $265 million, the Wall Street Journal reported, citing unidentified people familiar with the matter. The UBS press office didn't immediately return Bloomberg News' calls. E.ON AG gained 0.4 percent to 58.91 euros. RWE AG rose 0.2 percent to 40.51 euros. Germany's largest and second-biggest utilities, respectively, had their stock recommendations raised by analysts at Lehman Brothers Holdings Inc., who said they were ``positive on mid-term earnings momentum.'' The brokerage lifted its recommendation on E.ON to ``overweight'' from ``equal-weight,'' while raising its view on RWE to ``equal-weight'' from ``underweight.'' It also said in a note to investors that it increased its earnings forecast for the 2005-2008 period by an average 18 percent for E.ON and by 19 percent for RWE.
Tiscali
Tiscali SpA, Europe's third-largest Internet-service provider, gained 0.8 percent to 2.36 euros after the company agreed to sell its fourth foreign unit in two weeks. Tiscali today said it sold its Swedish unit for the equivalent of 13 million euros ($16 million) to Lycos Europe. Huber & Suhner AG jumped 6.8 percent to 85.5 francs. The Swiss cable and antenna-systems company with clients including Nokia Oyj said first-half net income rose more than tenfold to 19.9 million francs as it cut costs and demand rebounded. Compagnie Generale de Geophysique SA increased 7 percent to 46.72 euros. The French seismic mapping company said it won a contract worth $100 million from Indian national oil company ONGC to provide marine surveys covering the country's coasts. Viaggi del Ventaglio SpA lost 3.8 percent to 1.09 euros. The Italian tour operator may be unable to repay its bonds maturing next year because of insufficient cash flow, daily Finanza e Mercati reported, citing the company's first-half 2004 report. ///www.bloomberg.com