Markets & Finance

European Indexes Recover


Indexes rose Tuesday afternoon after the morning's slip. M&A news continued to be in focus.

From Standard & Poor's European MarketScope

European indexes recovered in afternoon trading. Oil traded at US$56.70/bbl. Wall Street was trading up on M&A offsetting caution ahead of the FOMC meeting. US data revealed a stronger-than-expected pace of February home construction.

UK: The FTSE 100 closed in positive territory as M&A news in the banking sector outweighed higher-than-expected UK inflation data. UK inflation in February rose unexpectedly above target to 2.8%. The data could give the BoE more reason to raise interest rates. The pound jumped to US$1.9591.

Among financial stocks: Barclays (BCS) (+3.69%) confirmed that it was in exclusive merger talks with Dutch peer ABN Amro (ABN) saying the combined entity will have HQ in Amsterdam and will have a primary listing on the LSE. The banks also agreed that the first chairman will be nominated by ABN and the first CEO by Barclays.

Prudential (PUK) (+3.32%) gained on reports that US group AIG (AIG) was crunching the numbers. Insurer Friends Provident (-5.94%) said its FY EEV underlying PTP fell 3% to GBP509m, hit by falling profits in asset management.

In M&A news, Whitbread (+11.09%) attracted interest on talk of a private equity bid at GBP23/share, with Citi bullish on its property assets. ICAP (+5.98%) gained on talk of a bid at GBP7/sh. In broker action: Morrison (-2.14%) slid after a Deutsche downgrade to hold.

France: The CAC 40 index (+0.81%) bounced back from negative territory to end the session comfortably higher. Vinci (+5.37%), Suez (SZE) (+1.77%) and Sanofi (SNY) (+1.10%) fuelled the index, adding 16 index points. Speculation that Pinault is looking to up his stake in Vinci boosted shares.

Carrefour (-0.04%) faced profit taking after recent solid gains. News today was that it will meet with Bernard Arnault and Colony Capital to discuss their request for two seats on Carrefour's supervisory board. Dexia (-0.87) fell in a correction of yesterday's surge on takeover speculation in the financial sector - a jump seen as 'unjustified' by many in the market.

The Spanish government said it will seek to help EADS (+2.46%) win more contracts to build aircraft parts. The European Commission has begun Phase II competition investigations into Swedish Tele2's sale of French operations to Vivendi (V) (+1.33%). In M&A news, rumor had it that Sodexho (+1.25%) could merge with Compass. However, other sources pointed out that a Dubai investment firm is looking at Compass. Natixis's (+0.11%) Coface bought the French and Belgian units of PagesJaunes's (+1.16%) Kompass.

Germany: The Xetra-Dax index also gained (+0.5%), managing to reverse the day's earlier losses. However, Deutsche Post (-4.78%) closed firmly in the red after its earnings forecast disappointed. Munich Re's (+0.01%) US unit made a net loss of US$1.03bn last year, with earnings mainly dented by additional provisions for asbestos claims.

Suedzucker (-8.22%) turned sour after it tabled a net loss of €200m for FY06/07, saying EU sugar reforms pushed it into the red. Lanxess (-3.21%) reported 4Q EBITDA before special items up 18% to EUR 105m, lower than expected. Takeover target talk once again did the rounds regarding Adidas (+2.25%). Also, there was denial from the Haniel family that it will sell its holding in Metro (+0.04%) to buy shares in Adidas, according to Bloomberg.

RWE (+1.33%) may be interested in bidding for Spain's Iberdrola, according to the rumor column in Neg-ocio.com. Meanwhile, Hispanidad.com said Caja Madrid is considering selling its approximately 9% stake in Iberia and that Lufthansa (+1.44%) was seen the most likely buyer. Hochtief (+4.52%) shares jumped up late in the session on an ACS bid rumor.

Elsewhere: Piazza Affari closed today's trading session on a flat note as the Swiss benchmark SMI index (+0.46%) had comfortably reversed earlier losses.

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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