M&A Boosts London

Ivaylo
06 Feb, 2001
New York City

Strong bid speculation supported the London benchmark index to a new high on Tuesday, as UK retailer J Sainsbury is again in focus on a possible approach by two companies. Other gainers included Cable & Wireless, also on merger talk as reports suggests Deutsche Telekom is considering a bid proposal. Lloyds was up on broker comment, while the only decliner was BP, as the oil company cut its guidance. By mid-day, the FTSE 100 was trading 25.4 points, or 0.56%, higher at 6,343.3.

[R]9:30AM NY-2:30PM London The FTSE 100 advanced on bid speculation.[/R]
The UK market was trading higher on Tuesday. By mid-day, the FTSE 100 was trading 25.4 points, or 0.56%, higher at 6,343.3. Supermarket groups were again in favor, with Tesco and William Morrison leading the advance as the market awaits further bid developments at J Sainsbury. Reportedly, private equity firm Cinven is in talks with Texas Pacific Group on a possible bid for the supermarket chain. Morrison rose 2.7%, while Tesco gained 2.5%. UBS also upgraded both Tesco and William Morrison. Lloyds TSB was also 1.6% higher on positive broker comment. Credit Suisse raised the rating on the bank from neutral to outperform. Bid talk also lifted Cable & Wireless, 2.3% higher, as reports suggest that Deutsche Telekom was considering a move for the UK group. The record defense budget that President George Bush requested from Congress boosted BAE Systems 3.2% higher. Aviva was another advancer up 0.3% on 25% growth in life and pensions sales in the UK.

Decliners

There were few decliners on the market, led by BP. The oil company was forced to cut its growth expectations for the next few years on weak results. BP forecasts production of more than 4.0 million barrels by 2009 and more than 4.3 million barrels of oil equivalent per day by 2012. The stock dipped 1.6%. Royal Dutch Shell followed suit and also declined 0.3%.

[R]7:30AMAsian markets ended mostly higher Tuesday on Japanese tech stocks.[/R]
Asian markets finished broadly higher on Tuesday. The Nikkei 225 Index in Japan closed 0.4% higher at 17,406.86. Tech stocks shone on Tuesday on strong quarterly results. Nikon, the fifth-largest digital camera maker in world, surged 5.4%, while Olympus, the fourth biggest, climbed 3.9%. Nikon raised its profit guidance for this fiscal year after reporting an 80% gain in its Q3 net income. Olympus also updated its profit projection by 13% and said its net income climbed 59%. Toyota Motor Corp. rose 1.8% before posting higher-than- estimated earnings as soon as the market closed. Sumco Corp. surged 8.9% after the company announced sales and pretax profit will increase 40% for this fiscal year.

Chinese Shanghai Composite closed 2.4% higher at 2,675.69. The market bounced back from a three-week low, on strength in lenders after Industrial Bank Co. announced earnings growth accelerated last year. Net profit surged 51% and the shares rallied 7.4%. Hong Kong Hang Seng Index ended 1% higher, up 199.58 points to 20,655.20. China Shipping Container Lines boosted the index, gaining 7.4'%, adding to strong gains Monday after the company said it is in talks to buy a stake in an unnamed company. Lenovo Group Ltd. fell 7% before the shares were suspended on information on a stake sale. Australian S&P/ASX 200 advanced 0.8% to close at 5848.50, supported by gains in banks, telecoms and mining shares. The Reserve Bank of Australia is to meet today and will probably leave the overnight cash rate target at a six-year high of 6.25%. Miner BHP Billiton gained 1%, pacing gains in copper and zinc prices.

[R]6:30AM European stocks advanced on Tuesday on strength in financial stocks[/R]
European markets gained on Tuesday morning. Of the main indexes, the FTSE 100 in London climbed 0.4% to 6,342, Frankfurt Xetra Dax added 0.3% to 6,896.19 and the CAC 40 in Paris edged 0.2% higher to 5,691.01.

Advancers

Capitalia, the Italian bank, advanced 1.9% after reports that Banco Santander Central Hispano of Spain was considering raising its stake, which is now 2%, to help the Italian bank in its struggle to defend itself from the bid approach by Dutch ABN Amro. Santander added 0.5%, while ABN Amro gained 0.8%. Allied Irish Banks was another stock in the sector that climbed 1.1% after S&P Equity Research lifted its target price on the stock. The mining and metals sector traded up by around 0.6%, with Anglo American shares up 2.1% and SSAB Svenskt Stal shares up 3% in Sweden. SSAB was lifted by an upgrade to outperform by Credit Suisse. Renewable Energy Corp, the Norwegian solar power systems company, bounced back from some of the previous session’s heavy losses and added 4.6%.

Decliners

In earnings news, BP, the British oil company, reported Q4 loss of 12% on output decline and costs increases. The stock declined 1.9%, while Dutch telecom group KPN also shed 0.4% as its Q4 profit plunged 32%. Another underperformer was Kemira which fell 7.2% after posting unexpectedly small gains in Q4 operating profit.

Oil and gold

Oil recovered and was trading above $59 on Tuesday on hopes that the coldest weather of the U.S. winter would increas the demand for heating oil. U.S. crude oil was up 69 cents at $59.43 a barrel in early trade in London, while Brent crude gained 65 cents to $58.75. Gold advanced in London for a second day in a row on speculation a rebound in some commodities will raise the appeal of the metal as a hedge against inflation. Gold for immediate delivery climbed $4.40, or 0.7%, to $652.85 an ounce in early trade in London.

Currencies

The euro traded lower against the U.S. dollar on Tuesday. The 13-nation currency bought $1.2928 in morning European trading, slightly up from $1.2927 in New York late Monday. The British pound advanced to $1.9629 from $1.9596 as there are expectations that the Bank of England may consider hiking the interest rates at its meeting on Thursday. The dollar was up to 120.46 Japanese yen from 120.35 yen on Monday.

[R]5:00AM Gold and other precious metals advance on oil, US position on Iran.[/R]
The top-traded April gold finished $4.60 up at $656.10 a troy ounce, while March silver futures gained 18.5 cents to end at $13.56 an ounce. April platinum closed $8.20 higher at $1,171.70 an ounce and March palladium also advanced $4.10 to finish at $342.35 an ounce. The front-month March copper contract edged 0.65 cent lower to end at $2.4165 per pound.

The front-month March crude oil contract gave up 28 cents to end at $58.74 a barrel after surging to $59.95 a barrel, its top level for a front-month contract since Jan. 3. March heating oil shed 0.80 cent to close at $1.6756 a gallon and March gasoline declined 1.30 cents to finish at $1.5599 a gallon. Natural gas for March delivery bucked the downtrend and gained 15.8 cents to $7.634 per million British thermal units.

On the New York Board of Trade, March Arabica coffee futures lost 1.75 cents to end at $1.1660 a pound and March futures of raw sugar in foreign ports declined 0.02 cent to 10.48 cents a pound.