Markets & Finance

European Indexes Gain


M&A continued to power markets Tuesday morning

From Standard & Poor's European MarketScope

European indexes were higher at mid-session. Oil eased to US$64.80/bbl amid hopes for a diplomatic solution to the stand-off between Iran and the UK. Gold dropped, but copper surged on the LME. Wall Street was expected to open in positive territory.

UK: The FTSE 100 index inched higher at mid-session led by mining stocks and M&A news in the utility sector. In London, utilities powered up - Scottish & Southern Energy (+1.41%), Centrica (+2.01%), International Power (+1.75%) - after E.On (EON) struck a deal with Enel (EN) and Acciona admitting defeat in its €42.3 billion attempt to acquire Endesa. The three parties plan to carve up the Spanish utility's assets.

In company updates: Severn Trent (+1.04%) says trading performance was in line with expectations. The water company expected PBIT for Severn Trent Water to rise 1%-3% year-over-year. Resolution's (+1.76%) fiscal EEV rises to £6.13/sh, up 18%. The insurer, which has often been rumored to be a takeover target, said it continues to assess possible acquisitions.

Harry Potter publisher Bloomsbury (+1.70%) reported a fall in fiscal profit to £5.2 million as expected, adding that it has had a good start to the year. In other news, Imperial Tobacco (ITY) (-0.26%) shareholders have given the green light for a rights issue increase to fund the Altadis buy, The Times wrote.

France: The CAC 40 index remained firm in mid-session trading with Suez (SZE), Total (TOT) and heavyweight banks boosting the index. Utilities were amongst the top performers after news of E.On's deal with Acciona and Enel over Endesa. In addition, Reuters reported that the Socialist Party's plan to create a state energy cluster involving GDF (+1.99%) and EDF (+0.19%) does not imply the merger of the two groups. The current ruling party is pressing for GDF to merge with Suez (+2.3%).

Meanwhile, two onshore natural gas projects run by Total (TOT) (+0.65%) and Spain's Repsol (REP) are in talks to possibly cede a majority stake to Venezuelan state oil company PDVSA. BNP-Paribas (+0.82%) is buying Royal Bank of Scotland's RBSI Securities Services, which at Dec. 31 2006 had gross balance sheet assets of £1.787 billion. Alstom (+2.16%) signed a joint venture deal to build nuclear power plants with Russia's state-controlled Atomenergomash.

In another development, Alstom is in discussions with Indian Bharat Heavy Electricals to build nuclear power plants, according to Les Echos. In the luxury goods sector, PPR (+3%) and LVMH (+1%) rallied after HSBC lifted its targets and reiterated its overweight rating on both stocks. The broker explained that, although it has a neutral stance on the sector following two exceptional years, it sees a secular growth story for luxury.

Germany: The Xetra-Dax index (+0.88%) remained firmly higher at mid-session Tuesday. E.On (+6.97%) has struck a deal with Enel and Acciona. The three parties plan to carve up the Spanish utility's assets. Enel and Acciona, meanwhile, will launch their €41 per share bid for Endesa, possibly as soon as April 12, it is understood. Kepler said that with chances no better than for a minority position, E.On finally went for the most sensible option - pulling out and securing assets. There is talk that E.On may try to take over Scottish & Southern Energy.

Elsewhere, talk of a private equity bid at €120 per share pushed Continental (+3.53%) higher. Trades on German stock exchanges rose 53% year-over-year in March to €275 billion, according to Deutsche Boerse (-0.24%). Patrizia Immobilien (-0.18%) announced a co-investment accord with two international pension funds to invest €700 million jointly, mainly in commercial property in Germany.

On the earnings front, Praktiker's (+1.73%) 2006 net profit from continuing operations came in 8.4% higher year-over-year to €84.1 million. The DIY store operator proposed a dividend payment of €0.45 per share.

Elsewhere: The Ibex 35 index gained strength at midday, with utilities and the major banks leading the pack.

In Switzerland the SMI index (+0.90%) was one of the strongest performing indices of the European equity markets by midday, buoyed by an upgrade in 2007 and 2008 GDP growth forecasts by the Swiss KOF institute.

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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