Markets & Finance

European Indexes Gain


Investors waited on the central banks's decision on rates Thursday

From Standard & Poor's European MarketScope

European indexes gained Thursday as investors awaited word from the ECB. It was widely expected to raise rates to 3.75%. Oil trades at US$61.76 a barrel following a surprise draw in US crude and gasoline stocks. Wall Street was expected to open cautiously higher.

UK: The FTSE 100 index climbed at mid-session, led by mining, energy and banking stocks. The Bank of England left interest rates steady at 5.25% as expected.

In earnings, Royal & Sun Alliance (+1.56%) was marked higher after posting a forecast-beating 5% rise in fiscal operating profit to £780 million. The UK's second-largest commercial insurer unveiled a new dividend policy intending to grow future dividends in line with inflation. Drax (-0.41%) reported a 144% rise in fiscal core profit. The company, which runs Europe's largest coal-fired power station, also says that it will invest £67 million to go green.

Slough Estates (-0.92%) reported a 14% rise in diluted adjusted NAV to 775p/share, ahead of analyst expectations. In M&A talk, Tate & Lyle (+2.74%) roses on talk of private equity interest. In other news, software firm Misys (-3.01%) unveiled its new strategy and sold its stake in Sesame. Spirent (+3.80%) said CEO Anders Gustafsson has left with immediate effect and chairman Edward Bramson will be executive chairman.

PARIS

The CAC 40 index (+0.85%) traded higher at mid-session. Total (TOT)(+1.18%) and BNP Paribas (+1.58%) boosted the index, together adding 13 points. The former enjoyed rising oil prices; the latter gained on news that JP Morgan upgraded the company to overweight from neutral.

Among those reporting, Pernod Ricard (-4.92%) posted operating profit of €886 million, up 20% year-over-year, but below consensus expectations. Carrefour (-1.44%) posted in-line fiscal 2006 net sales of €77.901 billion, +6.6%. Suez (SZE) (+2.01%) reported 2006 net profit of €3.606 billion, higher than expected. PPR's (+1.95%) 2006 net earnings were a better-than-expected €685 million vs. €535 million in 2005. Veolia (VE) (+2.27%) posted operating profit of €2.222 billion, a touch above consensus of €2.205 billion. Club Med (+1.22%) posted first quarter 2007 sales of €355.3 million, +2.3%.

Elsewhere, Schneider (+2.7%) will launch a €1 billion capital increase at one new share, priced at €73 each, for 17 existing. Alstom (+1.44%) bought Power Systems MFG from Calpine Corporation for US$242 million. Morgan Stanley upgraded Schneider (+2.77%) to overweight from equal weight and lifted its target to €115 from €93. The same broker also initiated Arcelor Mittal (+2.27%) with overweight and US$58 target.

Germany: The Xetra-Dax index (+0.8%) traded higher on Thursday after a late rally in Japan. Deutsche Boerse's (+2.05%) CFO, Mathias Hlubek, has resigned. Board member Ganz is also leaving. This is considered an indication that the exchange is planning to implement a holding structure. On the earnings front, BMW (+1.48%) reported 2006 group pretax profit of €4.124 billion, in line with expectations. The luxury cars group said it will again ask for authorization to buy back up to 10% of its share capital.

SGL Carbon (+3.12%) tabled better-than-expected full-year EBIT of €170 million and hinted at raising its mid-term goals. Salzgitter's (+4.03%) 2006 pretax profit before one-offs of €947.9 million was comfortably ahead of expectations. The steel and pipes group, meanwhile, has taken a 78% stake in machine and installations group Kloeckner Werke (+26.53%).

Non-binding offers for Merck's (+1.34%) generics unit, worth at least €4 billion, are due early next week. Carlyle is potentially looking to bid. Traffic for Air Berlin (+2.43%) rose 12.3% year-over-year to 1.3 million passengers last month. Key on the broker front, Bayer (BAY) (+2.93%) and Kloeckner & the company (+6.39%) gained from upgrades to buy at UBS.

Elsewhere: The benchmark indexes in Zurich and Madrid remained firmly higher as well.

Claudia Perotti, Lydia Carroll, Sara Oscarsson, Isabell Witt, Michael Sanderson, Gaurav Panchal, Julien Manrique, John West, Ben Marino, Emma Stevenson, Pawan Girglani

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