Orange Telecom Merger Talk Drive European Markets Higher

Lucy Stoeva
10 Mar, 2016
New York City

European stock markets rose on higher oil prices, a rebound in banking stocks, and merger talk in the telecom sector. Telecom Italia and Orange may pursue a merger. Credit Agricole announced an ambitious cost saving program and distribute 50% of earnings as dividends from the next year.

[R]4:00 PM Frankfurt, Germany – European stock markets rose on higher oil prices, a rebound in banking stocks, and merger talk in the telecom sector. Telecom Italia and Orange may pursue a merger. Credit Agricole announced an ambitious cost saving program and distribute 50% of earnings as dividends from the next year.[/R]

European stock markets rose Wednesday on higher oil prices, a rebound in banking stocks, and merger talk in the telecom sector.

The upcoming meeting of the European Central Bank also improved sentiment as investors anticipate an additional decline in the deposit rate, an expansion of the bank’s asset purchase program, and additional support for the banking system.

The banking sector rebounded after falling yesterday on concerns about the effect of low rates on profitability.

In Paris, Credit Agricole surged 1.2%, and Societe Generale rose 1.3%, while in the U.K. HSBC Holdings advanced 0.6%. Spain''s Bankiter added 1.4% and Italy’s Intesa Sanpaolo surged 1.7%,

Brent crude oil futures gained 1.97% to $40.43, while WTI crude oil advanced 2.12% to $37.30.

Among oil and energy companies, OMV advanced 2.6%, Tullow Oil added 3%, and Royal Dutch Shell gained 0.5%.

However, Seadrill fell 17% in Oslo after the unprecedented stock price surge in the past three trading days.

Telecom Italia jumped 2.7% after chief executive of the France-based Orange said he may consider a merger with the Italian telecom.

Shares of Orange gained 1.9% in Paris.

Mark Carney, Bank of England Governor said the central bank would not make any official recommendation on the potential Brexit, the U.K. exit from the European Union.

The FTSE 100 index gained 30.74, or 0.50%, to 6,156.18, while the DAX index added 107.57, or 1.11%, to 9,800.39

In Paris, the CAC 40 index rose 47.07, or 1.07%, to 4,451.09

Credit Agricole SA shot up 1.9% to €1.99 after the French bank announced an ambitious cost-saving program and said it would distribute 50% of its profit in cash dividends from the next fiscal year.

The bank, which is selling its 25% stake in the regional cooperative banks, will focus on retail banking, asset management and insurance sector to improve profitability over the next three years.

Bank has targeted total savings of €900 million by 2019 through job cuts, IT system optimization, and simplification of the corporate structure.

The banks expects net profit of more than €4.2 billion in 2019, compared with €3.52 billion in 2015.

Credit Agricole expects total revenue to grow annually by 2.5% between 2016 and 2019.

Telecom Italia SpA soared 2.7% to €1.02 on the possibility of a merger with Paris-based wireless telecom operator Orange.

Chief executive of Orange said he would consider a possible merger with Telecom Italia if Vivendi, the top shareholder, invited him.

Both companies made comments that they would be interested in pursuing a merger of two companies that are competitive across Europe.

Volkswagen AG tumbled 1.4% to €128.1 on media reports in the U.S. and in Germany that the U.S. Justice Department is expanding its investigation of the automaker.

The piling costs, related to the regulatory and judicial claims, are expected to impact profits in the years to come.