Markets & Finance

Total Rises on Higher Oil


From Standard & Poor's European MarketScope

France

Oil group Total was up €3.40 to €188.00 as the benchmark crude oil price was back above $54 per barrel. The front-month contract rose $1.70 per barrel overnight as news that the first tropical storm of the season was heading for the Gulf reached the trading floors.

Alcatel, the provider of broadband Internet equipment, was up €0.22 to €9.17 and chipmaker STMicroelectronics was up €0.23 to €13.23, after Intel raised its second-quarter sales and profit margins projections, as laptop demand rises. Intel said sales will rise to between $9.1 billion to $9.3 billion, exceeding the $8.6 billion to $9.2 billion predicted in April. Separately, the Semiconductor Industry Association yesterday predicted a 6% rise in sales to a record $226 billion for 2005, driven by growth in cell phones, personal computers, and digital TVs and cameras.

IT consultancy Cap Gemini was up €0.46 to €27.12 after the company and Danish telecom group TDC announce they have signed a three-year agreement for Cap Gemini to deliver IT services and develop TDC's current services.

Cosmetics group L'Oreal was up €0.85 to €61.35 after Merrill Lynch warned that the company might not meet its fiscal-year 2005 organic top-line growth target. The broker added that, with stock trading at price-to fiscal-year 2005 earnings ratio of 25, the broker would look into locking profit ahead of the first-half 2005 results. However, it added that the company could benefit disproportionately from U.S. dollar strength.

Germany

Chipmaker Infineon was up €0.33 to €7.66 after announcing that engineering group M+W Zander is to build a plant for the company worth $168 million in Malaysia. Separately, Intel raised its second-quarter sales and profit margins projections, as laptop demand rises. Also today, National Semiconductor today said its fourth-quarter profit rose 40% to $132.1 million. Separately, the Semiconductor Industry Association yesterday predicted a 6% rise in sales to a record $226 billion for 2005.

Airline Lufthansa was up €0.08 to €10.40, after the company said that it expects to see positive results from Swiss International airlines integration by 2006, according to a company newsletter. Project leader Jens Bischof said that an exact merger schedule is hard to forecast because of negotiations over traffic rights. Neither company can act until they receive anti-competition approval for the takeover expected in the first half of July.

Retail group Metro AG was up €0.51 to €42.52 after Lehman Brothers upgraded the company upgrades to overweight from equalweight and increased its target to €44 from €42. Like Britain's discount retailer Tesco, Metro AG is a quality business which should trade at a multiple-point premium to the sector, given its ability to drive sales through new space at its core electronics and cash & carry divisions, said the broker. With the company now trading at €41 and like-for-like growth set to accelerate in the second half, any share price weakness due to a challenging second quarter of 2005 should be viewed as a buying opportunity, the broker said.

DaimlerChrysler was up €0.28 to €33.27, after the company's head of the heavy trucks unit, Andreas Renscher, said U.S. sales are expected to decline by 2007. Renscher said that he is preparing for the downturn with the help of natural hedging and cost reductions. He added that the heavy truck market is very good now and the company may be able to boost market share by as much as 0.2% this year. The company currently enjoys about a 38% market share.

Britain

Oil group Shell Transport was up £0.09 to £4.94, after it emerged that Russian gas monopoly Gazprom is interested in acquiring 25% plus one share in the Sakhalin Energy project, led by the company, in Russia's Far East. Citigroup noted that Shell Transport has been linked to independent exploration and production company Talisman in the international oil press, which follows speculation a fortnight ago involving Total. The broker argued that Talisman seems an unlikely target for the majors due to the maturity of its portfolio. In addition, U.S. oil stocks outperformed overnight with as the front-month contract for benchmark crude oil rose $1.70 on the news that the first tropical storm of the season was heading for the Gulf reached the trading floors.

Reuters news and information group was up £0.13 to £4.13 after the bank ABN Amro lifted its target to £4.55 from £4.45, and reiterated an add rating. JP Morgan said that it thinks that the new strategy presentation in the third-quarter should provide support for its new forecasts for 2007 to 2010, which are now 5% to 10% above consensus. Separately, electronic brokerage Instinet rejected a bid by Third Avenue Management LLC to buy Instinet's institutional brokerage unit and said it preferred a pending offer with the Nasdaq stock exchange instead. As part of the overall $1.9 billion deal with Nasdaq, Instinet agreed to sell its brokerage unit to buyout firm Silver Lake Partners for $207.5 million.

Cigarette maker British American Tobacco was down £0.19 to £10.82 after the investment bank and asset management group Cazenove said that the company is its top sector pick and kept its rating on the sector as overweight. As for other players, the broker downgraded Gallaher to underperform from in-line and upgraded Imperial Tobacco to in-line from underperform and kept Altadis in-line. Meanwhile, Swiss luxury goods maker Richemont denied it planned to cut its 18.3% stake in the company to raise funds for acquisitions, brushing aside rumours it might buy jewellery makers Tiffany or Bulgari to expand its stable of top brands, the Financial Times reportd.

Hedge-fund manager Man Group was up £0.18 to £14.11 after the Financial Times reported that Stanley Fink, the chief executive, saw his gross pay fall 16% to £3.8m in the year to March 31, in spite of reporting higher profits and an increased dividend. The reason for Fink's lower total earnings was a smaller bonus of £3.3 million compared with £4 million the previous year. The company said that, while it had achieved solid growth in the areas to which the bonuses of executive directors and senior managers were tied, increases in percentage terms had slowed.

Luxury retailer Burberry was up £0.14 to £4.19, after the company said that fiscal-year results under International Financial Reporting Standards mean turnover and gross profit are unchanged. However, earnings before interest, taxes and amortization is £161.3 million compared to £165.5 million under British Generally Accepted Accounting Principles.


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