'Financial Times': European Markets Mixed Ahead of ECB Interest Rates Decision; Suez, E.ON Nearing Merger Deal
DAVID HAFFENREFFER, CNN ANCHOR: The European markets right now are mixed ahead of the ECB decision today, but we are seeing some more pronounced losses in the Paris stock market.</s>CHRISTINE ROMANS, CNN ANCHOR: And Adrienne Roberts of the "Financial Times" joins us from the "FT"'s London newsroom. First off, a couple more hours maybe until we get an ECB announcement. What are the markets there expecting?</s>ADRIENNE ROBERTS, "FINANCIAL TIMES": Well, there's no question that there's going to be an interest rate rise. What the markets want to know is whether it's going to be a quarter of a percentage point or half a percentage point. The stock exchanges generally are a little bit lower because nobody really wants to take any major financial position until they know what happens. And as you say, Christine, the decision comes through in a little under three hours. Bond market also slightly weaker, and the currencies hanging in there, but still very weak. Both sterling and euro are very weak. So it's basically a case now of, will it be 50 basis points or will it be 25? If it is 50, then it could be bad for bonds. If it's 25, it could be bad for the euro. It's rather a case of, damned if you do, damned if you don't for the European Central Bank, I think.</s>HAFFENREFFER: Well, we still do have the higher oil prices around the world right now. Is that helping to shape the ECB's decision, do you imagine?</s>ROBERTS: I think it must. Obviously, oil prices do pose a significant threat to inflation. I think that's one of the main sources. And, of course, with a weak euro, oil prices hit European importers twice. It's a sort of double whammy, because not only does the dollar price of oil go up but, as the euro weakens, European importers' purchasing power weakens as well. So they're kind of disempowered on two fronts there. So, obviously, I think the European Central Bank is going to be watching oil prices very closely in its decision.</s>ROMANS: So, is the ECB sort of hijacking the headlines this morning, or is there any corporate news you can tell us about?</s>ROBERTS: Well, yes to both questions. In the meantime, while we wait, a few things are happening. That planned merger between Suez Lyonnaise des Eaux, the big French utility company, and E.ON in Frankfurt appears to be taking shape. The "Financial Times" announced this morning that -- or published this morning -- that the holding company structure there has been thrashed out for that merger. And so now it looks as though, after 15 months of talks, that deal is coming together. It is not a small deal in terms of yesterday's market prices. The market cap of the merged utility company would be somewhere in the region of $70 billion U.S, so it's going to be significant, basically one of the biggest world players. The stock markets are not reacting very well in France, Suez Lyonnaise des Eaux's share price was down more than 5 percent earlier this morning. E.ON is trading more or less flat. I think the problem with Suez is that some people are thinking that perhaps it should be going back to core competencies instead of expanding on this sort of level. So there's a little bit of skepticism there still.</s>HAFFENREFFER: All right, Adrienne Roberts at the "Financial Times," thanks for the update.