European Indexes Cling to Small Gains

In light trading, newsflow focused on M&A and positive indicators from the U.S.

From Standard & Poor's European MarketScope

Wall Street turned flat Tuesday just before Europe's close after gains accompanied a 1.0% dip in the price of oil and solid Christmas season sales data. Trading was thin as London remained closed for the Christmas long weekend.

Germany: The Xetra-Dax index closed with comfortable gains. ThyssenKrupp (+0.29%) may raise its offer for Dofasco, the Canadian steel maker, to as much as CAD65/share, again topping the bid from Arcelor. Germanwings, Lufthansa's (+0.16%) low-cost affiliate, will probably break even or make a small profit in 2005, similar to its results in 2004, managing director Klein told DPA.

Siemens (SI )(+1.0%) has landed a US$213 million contract to supply equipment for a large gas-fired power complex in Vietnam. Karstadt's (-0.63%) Christmas sales were above last year's level, the department store operator said. Retail group Christmas sales are flat so far this year against last, said sector association HDE. Postbank (+1.54%) CEO Schimmelmann reportedly won't rule out further acquisitions in 2006, but will focus on the integration of the BHW unit first.

Premiere's (+8.33%) head, Georg Kofler, suggested to Welt am Sonntag that the pay-TV group is open to takeovers. In FAZ he promised stable subscriber numbers even after Premiere failed to win the right to televise Germany's football league matches. An announcement of DaimlerChrysler's (DCX ) (unch.)) sale of MTU Friedrichshafen is expected Wednesday, with Sweden's buyout group EQT the likely buyer of the diesel motor unit.

France: The CAC 40 (+0.41%) pared gains at the close but remained upbeat with a positive breadth of 29-10. In Paris, L'Oreal (+1.28%) made gains after acquiring 31.2 million of its own shares for an estimated €31.16 million. LVMH (+0.93%) was stronger after Le Journal des Finances recommended buying the luxury stock on its strong outlook. France Telecom (FTE ) (+0.62%) provided support on news that it is mulling a strategic alliance with Spain's Euskaltel, according to Les Echos.

In other news, Accor (+2.03%) was higher on news that it will sell and lease around 80 hotels to raise cash for expansion in countries such as Russia and China. Arcelor (+0.95%) was also in focus as Germany's ThyssenKrupp could offer as much as CAD65 per share for Dofasco, exceeding Arcelor's bid. Scor (+1.1%) remained upbeat after the Journal des Finances reported that the insurance group could exceed targets on a program to renew contracts with clients. Finally, Valeo (+1.38%) was positive on news that it could acquire half of South Korean radiator maker Threestar. UK markets were closed Tuesday.

Elsewhere: The SMI (+0.68%) made comfortable gains. Novartis (NVS )(+0.96%) may offer CHF1,050 per share for Serono (-0.1%), SonntagsZeitung reported. It is currently carrying out due diligence at Europe's No. 1 biotech group. Meanwhile, Dutch group Crucell is considering a counter bid with a cash element for Berna Biotech (+0.96%), should another group make an offer. Reminder: Crucell made an all-share offer for the Swiss vaccine group earlier this month, but Novartis said it is considering a cash bid.

Piazza Affari lost traction in late afternoon, but managed a 0.29% advance, mainly supported by financial stocks. A report showing the U.S. Christmas season delivered a healthy rise of 8.7% in consumer spending supported Luxottica (+1.63%). Generali (+0.89%) was also well bid. The insurer denied that it intends to buy out minorities at Alleanza (-1.77%), as reported earlier by the local press.

Prepared by Zaida Espana, Valerie Vidal, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, Julien Manrique, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report.
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