Markets & Finance

Europe Stocks Finish higher


M&A and profit news helped boost the major indexes

London

The FTSE 100 closed strongly higher tracking positive trading on Wall Street. WTI is at US$74.84/bbl. M&A news and broker changes were in focus.

Among insurers, Resolution (+1.27%%) and Friends Provident (+7.83%) confirmed they are in all-share merger talks. The deal, if agreed, will see Friends Provident shareholders owning 49.1% and Resolution shareholders with 50.9% of the merged company. Further in the battle for ABN Amro, Barclays (+3.15%) revised its offer for the Dutch bank to €67.5billion, constituting €42.7billion in shares and €24.8billion in cash.

In Sainsbury's (+0.34%) bid news, Delta Two is facing confrontation with members of the Sainsbury family who have hardened their opposition to the proposals, The Times reported. the paper added the family also views Delta's GBP6/sh offer as too low. In broker changes, SABMiller (+1.84%) climbed after Citigroup upgrades the stock to buy to reflect expected strength in emerging markets.

In updates, EMAP (+0.06%) sold 50% of Box Television to Channel 4 for GBP28m as a part of a j/v. Spread-better IG Group (-0.32%) unveiled a 34% rise in EBITDA to GBP70.4m, ahead of the GBP68.7m expected. Domino's Pizza (+6.29%) served up a 35% jump in 1H PTP and said it was is positive on FY profit growth.

Paris

The CAC 40 (+0.87%) closed firmly higher, with Wall Street trading in the black. GlobalSantaFe and Transocean have agreed to merge, forming a US$53bn oil drilling firm. Technip (+2.04%) climbed in response.

Amid blue chips, Total (+1.72%) added 13 index points, while Arcelor Mittal (+1.85%) outperformed. Its deal to buy two units from Vallourec (-1.56%) has dampened speculative interest in the tube maker. Peugeot (+1.49%) benefited from an Exane price target hike to €73. Nicolas Sarkozy is planning to expel Siemens from a joint venture with Areva (+0.99%), The Daily Telegraph wrote, saying the move is a first step to clear the way for a grand merger with Alstom (+1.52%) and Bouygues (+1.54%). EDF (+0.87%) will invest US$625m in a joint venture with US Constellation Energy to build nuclear plants in the US.

Among financials, Credit Agricole (unch) may join Credito Emiliano to bid for the 198 agencies being sold by Italy's Intesa SanPaolo, according to La Tribune.

In further news, Credit Agricole's Predica unit now owns 2.3% of Vinci (+1.04%), Les Echos reported. In late trade, market rumour did the rounds that Vivendi (+0.88%) could bid for Germany's Premiere. EADS's (unch) Airbus is set to receive indicative proposals on Thursday from a group of leading aerospace suppliers to take over six of its 17 manufacturing sites in Germany, France and the UK, the FT reported.

Frankfurt

Xetra-Dax (+0.88%) closed comfortably higher on Monday after strong trading in the US. DaimlerChrysler (+2.73%) added fuel to the index after rumours that it may significantly revise up its profit expectations for this year. Some traders also noted speculation that the Chrysler deal has been completed.

Siemens (+1.42%) provided support to the Dax as Continental (+0.54%) and TRW had submitted bids for the industrial giants VDO unit of above €12billion, according to Handelsblatt.

Elsewhere, Hypo Real Estate (-6.22%) has agreed to buy Depfa (+12.22%), the German government lender, for around €5.7billion. WestLB said combining the groups' complementary business cases makes considerable sense.

Meanwhile, there was unsubstantiated talk that Paris-listed Dexia could put a counter-offer on the table. Similiar unsubstantiated talk pushed up Premiere (+5.6%) after rumours Vivendi is interested. Offical was TomTom's €21.25 per share bid for Tele Atlas (+33.09%). Austria's A-Tec Industries will no longer block a plan by Norddeutsche Affinerie (-1.01%) to buy Belgium's Cumerio. It agreed to transfer its stake in Cumerio to Norddeutsche and become a shareholder of the refiner, according to Handelsblatt. SAP (+2.85%) saw a target hike at Dresdner, while Barron's said the group looks like a target for a leveraged LBO.

Spain

The Ibex 35 ended Monday's session higher, boosted by Acciona and upbeat trading on Wall Street after strong results from the likes of Halliburton, Merck and Schering-Plough. Of local note, Acciona (+3.1%) was the top percentage gainer following a target hike from Citigroup and amid reports that the CNMV will approve the bid on Endesa (+0.43%) this week.

Telefonica (+1.46%) moved up as Vivo posted a narrower 2Q net loss. Prisa (+2.6%) and Sogecable (+2.0%) rose following the death of Prisa's Chairman Jesus de Polanco at the weekend. Kepler said a change in management and possible restructuring would be good news.

After the close on Friday, Acerinox (-0.44%) announced 1H net profit up 305%, but brokers argued that these represent peak results, and the outlook is uncertain. Santander (+1.0%) was eyed as the RBS-led consortium said it has received regulatory clearances regarding its offer for ABN Amro and therefore formally launches the bid.

Meanwhile, Barclays made a revised offer for ABN Amro of €67.5billion. Iberdrola (+1.16%) has sold a 3% stake in REE (+0.32%) for €138m. Ferrovial's (-1.02%) Budimex has been threatened with fines for delays to work at Warsaw airport, according to the press.

Nordic

Finland's OMXHPI closed flat, while the remaining Nordic indexes ended higher as US stocks traded firmly positive due to stronger-than-expected earnings results from Halliburton, Merck, Schering-Plough and Hasbro, and M&A news.

In the Nordics, H&M (+1%) gained on weekly German clothing retail sales, which rose by 3% y/y. Media group Metro International (-4.29%) fell after 2Q07 PTP was US$3.7m vs US$5.3m y/y and revenue of US$119.8m was up 6.9% y/y vs consensus of US$124m.

In M&A, Atlas Copco (+2.32%) gained after signing an agreement to acquire the assets of Mafi-Trench Corporation. Engineering company Subsea 7 (+4.07%) surged on news it has extended a Hybrid Vessel contract with Petrobras, until 2010. The company says the value of the contract extension is c.US$390m. Moeller Maersk's (+0.67%) Terminals Tangier, and the Akwa Group, a Casablanca, Morocco-based partner announced the opening of Morocco's newest container terminal.

Aluminium manufacturer Norsk Hydro (+0.1%) and Brazilian mining company CVRD, have signed an agreement to develop a new alumina refinery in northern Brazil. The company will hold a 20% share in the refinery and said the investment cost in the first stage is c.US$1.5billion.

In broker changes, JP Morgan upgraded Swedish Match (+0.72%) to overweight from neutral, Credit Suisse upgraded the share to neutral from underperform. HSBC lifted the target price for SKF (+2.36%) to SEK155 from SEK140.


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