Markets & Finance

European Indexes Mixed


M&A news and a positive start in New York provided some uplift Tuesday

From Standard & Poor's European MarketScope

European indexes traded closely mixed Tuesday morning. Wall Street started the day modestly higher as oil fell to US$64.26/bl.

UK: The FTSE 100 index traded higher at mid-session, helped by Vodafone (VOD)(+4.36%) and supported by M&A activity. The pound was at US$1.9865.

Among earnings, Vodafone posted core profit of £11.960 billion, up 1.6%. The EBITDA figure came in lower than expectations of £12.4 billion. However, the shares jumped as the dividend payout of 6.76p, up 11.4%, impressed. Also, renewed talk of a possible AT&T (T) bid at £2.20/share added to the gains.

Moreover, British Airways (BAB) (+4.56%) flew after Goldman Sachs suspended its rating and target on the stock temporarily. The investment bank also raised its stake last week to 5.1% from below 3%, according to a regulatory filing. In M&A news, Rio Tinto (RTP) (+0.22%) has reportedly hired Deutsche Bank to advise it on a possible US$27 billion bid for Canada's Alcan. Xstrata (+0.69%) extended until June 7 its offer to buy the outstanding shares of LionOre.

Among banks, the consortium, comprising Royal Bank of Scotland (-0.18%), Fortis and Santander, unveiled a €71.1 billion, or €38.40/share, offer for ABN Amro (ABN). BP's (BP) (+0.53%) attempts to save its joint venture to exploit Russia's Kovytka gas field suffered a fresh blow when a Siberian court threw out a legal challenge that might have preserved its license, The Times reported.

France: The CAC 40 index (-0.15%) traded a touch lower at mid-session. Renault (+2.79%) led the gainers after a Les Echos report showed French car producers moving more production abroad: PSA (+0.22%). France Telecom's (FTE) (+0.31%) Dutch Orange unit could be bought by Deutsche Telekom (DT), with the latter handing over Spanish Internet provider Ya.com and €1 billion, according to La Tribune, citing a source close to DT.

Among losers, Sanofi (SNY) (-1.04%) fell as Ypsomed fiscal sales revealed slowing growth of the former's insulin. In energy, Direct Energie has filed a complaint against competitor EDF (-0.96%) to the competition authorities, wrote Les Echos. Financier and EADS (-0.68%) stakeholder Arnaud Lagardere will face questions from the AMF today as part of the latter's insider dealing investigation.

In the wider market, Eurotunnel resumed trading after management's share swap plan won the support of 87% of shareholders last Friday. It traded at €0.74 vs. €0.37 before suspension. In broker news, ADP (-4.08%) was downgraded to underweight by JP Morgan, which believes a state sale is not immediately forthcoming. Safran (+1.38%) was lifted by a Goldman Sachs upgrade to neutral - the broker sees potential in a tie-up with Thales (-0.81%). Gemalto (+6.48%) jumped after a Citigroup upgrade to buy.

Germany: The Xetra-Dax index (+0.4%) traded comfortably higher at mid-session. Vodafone's numbers were interesting for the likes of Deutsche Telekom (DT) (+1.64%). CEO Rene Obermann, in the mean time, told FAZ that Deutsche Telekom is on track to reach its full-year earnings target.

Elsewhere, E.On (EON) (-1.0%) probably won't hand out an extraordinary dividend as it seeks to expand into new markets, Euro am Sonntag reported, citing Vice Chairman Hubertus Schmoldt. E.On is, for instance, among four firms that have placed offers for a stake in Russian power generator OGC-5. There is talk of Acciona considering buying Solar World (+4.38%), noted Spanish website Negocio.

On the German earnings front, Colonia Real Estate (+1.57%) reported first quarter net profit of €5.18 million and raised its profit outlook. MAN (+1.02%) has reached a £250 million legal settlement over a fraud claim with DCX's (DCX) (-0.68%) Freightliner division over a unit bought by MAN in 2000. Lower Saxony has bought more shares in VW (+1.69%) in order to keep the state's holding above 20%, reported Hannoversche Allgemeine Zeitung. Goteborgs Posten wrote that Ford is planning to sell Volvo. The Swedish paper reckons BMW (+1.91%) could be a possible buyer.

Elsewhere: Piazza Affari made mixed progress in mid-session trading.

In Zurich, the SMI index (+0.16%) remained modestly higher.

Claudia Perotti, Sara Oscarsson, Isabell Witt, Michael Sanderson, Gaurav Panchal, Julien Manrique, John West, Ben Marino, Emma Stevenson, Pawan Girglani, Mohammed El Sadek.

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