European Stocks to Watch: BAE Systems

Shares in BAE Systems fell (2.3%) in response to reports from the British press that Europe's largest defense company paid 1 billion pounds ($2 billion) over a decade to a Saudi prince to seal one of the U.K.'s biggest-ever arms export contracts.

BAE denied any wrongdoing Thursday saying there was "no case to answer" in a company statement, but the protest failed to change investors' attitude toward the stock.

The payments were also made with the knowledge of Britain's Ministry of Defence, according to the reports from the U.K.'s Guardian newspaper and broadcaster the BBC, which originally reported the story.

Rhodia (Down 6.5%) Shares in the French chemicals company tanked on market speculation the G8 summit in Germany would produce a tougher-than-expected statement on carbon dioxide regulation.

Halfords (Up 6%) Investors reacted positively to an outlook statement from the U.K. car-parts retailer and results that were in line with expectations.

FKI (Down 12.6%) The engineering company disappointed Lehman Brothers with its strategic review, despite the operational performance being largely in line with expectations.

Alitalia (Up 1.6%) The Italian airline ended a stand-off with its flight attendants, which has caused a numbers of protests in recent weeks, the company announced after the bell Wednesday.

DSV (Down by 3%) In an attempt to increase market presence the Danish transport company bought two smaller freight companies in Ireland.

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