PARIS (Thomson Financial) - Share prices were higher at midday, rebounding slightly from Friday's big drop, in a quiet market lacking direction before Wall Street's resumption after a three-day weekend in the United States.
Credit Agricole was down sharply, however. The bank was affected by a report of further depreciations from the credit crisis as well as concerns over UBS and Credit Suisse being required by regulators to boost their balance sheets, market sources said.
At 1:08 p.m., the CAC-40 index was up 21.52 points or 0.50 percent at 4,287.52. On the Matif, July CAC-40 futures were trading at 4,297.5.
The euro was at $1.5663 compared to $1.5637 early on Monday.
'There isn't much direction,' one Paris dealer said, stressing there is little economic or corporate news. 'We are recouping a little of what we lost on Friday.'
Credit Agricole was the biggest mover on the CAC-40, shedding 0.49 euros or 3.80 percent to 12.40.
Financial newsletter la Lettre de l'Expansion said depreciation on the banking group's Collateralized Debt Obligation (CDOs) and monolines could rise to 5.5 billion euros at the end of June 2008 from 4.1 billion euros at the end of Dec. 2007.
But Natixis analysts were sceptical about the source of these numbers.
Traders suggested Monday's move has more to do with read-across from Switzerland, where the authorities are looking to require Credit Suisse and UBS to set aside an additional 70 billion Swiss francs ($68.29 billion) in capital, according to a report in Swiss weekly Sonntag.
Another Paris-based trader said while the two banks will probably not have to increase their capital to the tune of 70 billion Swiss francs, the weekend report suggests 'their balance sheets are not yet suitably adjusted'.
Societe Generale was down 1.39 or 2.54 percent at 53.42. One analyst, who asked not to be named, said Friday's announcement of a 4 million euros fine from the banking regulator over 'grave deficiencies' in its internal controls could weigh on the group's prospects.
He said a scaling down of SocGen's trading books will lead to a downturn in the trading contribution for SocGen's CIB arm, which could cause further EPS cuts.
He also suggested rating agencies, which have already cut SocGen's rating, could see this lack of control as an additional risk, leading to a higher cost of capital.
But Natixis analysts disagreed, saying the French banking group is well placed to weather the downturn in the financial markets with a strong Tier 1 ratio.
Elsewhere in the banking sector, Dexia was 0.23 or 2.38 percent lower at 9.42 and BNP Paribas was off 0.57 or 1.00 percent at 56.47.
Renault was another significant faller, slipping 1.19 or 2.28 percent to 51.04. CEO Carlos Ghosn said on Saturday he expects a 'difficult' post-summer period for the French car market on declining consumer confidence.
He also warned raw material costs are accelerating, with Renault expecting an additional 1 billion euros in steel costs next year.
CM-CIC analysts cut their rating to 'reduce' from 'hold' and slashed their price target to 51 euros from 72, saying in a morning note Renault's 2008 and 2009 margin goals 'now seem unreachable'.
But the second Paris dealer said the shares are only seeing a moderate drop because analysts had already written off the group's targets.
Peugeot was also lower, down 0.19 or 0.59 percent at 31.96, on the gloomy comments of its French rival. CM-CIC downgraded Peugeot along with Renault, cutting its rating to 'reduce' from 'accumulate' and lowering its target to 31 euros from 58, citing a build-up of negative factors for 2009.
On the upside, utilities enjoyed gains, led by Suez, up 1.41 or 3.46 percent at 42.22, and merger partner Gaz de France, 0.91 or 2.34 percent at 39.82.
Vallourec was up 6.05 or 3.16 percent at 197.55 and ArcelorMittal added 1.25 or 2.33 percent to 54.83 as the steel stocks recouped a little of their heavy losses last week.
Air France-KLM was up 0.29 or 2.05 percent at 14.44 after the carrier was lifted by a slight easing of oil prices.
Dealers also welcomed its June traffic figures, which showed further growth in a difficult climate. tfn.paris@thomson.com gt/ms1 COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
