By James Langton

(April 3 – 09:00 ET) – The world’s biggest company will be the market’s biggest story this morning. Microsoft Corp. and the U.S. Department of Justice broke off their settlement talks over the weekend. The stock is falling overseas. The drop is expected to hit North American markets too.

Traders will be keying on Microsoft initially rather than the machinations at the U.S. Federal Reserve Board. Earnings season also starts this week.

In Europe stocks are down on the Microsoft news. Deutsche Telecom is also down after its online spin-off was priced lower than some traders were hoping. HSBC is weighing on the bank sector, with traders balking at its proposed US$10.5 billion bid for Credit Commercial de France. London’s FTSE has dropped 73 points to 6,540. France’s CAC 40 is down 93 points to 6,193. The DAX is off 98 points to 7,487 in Germany.

In Asia markets were mixed. Japan’s Nikkei closed up 390 points to 20,727.
This despite the fact that Japanese prime minister Obuchi had a stroke over
the weekend and has slipped into a coma. Japan’s March Tankan report was
released this morning, showing moderate improvement to business conditions.
The Japanese recovery appears to be on track. Hong Kong however could not
overcome the Microsoft news. The Hang Seng dropped 514 points to 16,893.