Deal Talk Inspires European Gains

Elena
19 Feb, 2007
New York City

European stocks hit multi-year highs on Monday, boosted by strength in the mining sector, a continuous advance in DaimlerChrysler and deal-inspired gains from Swiss reinsurer Converium Holdings. DaimlerChrysler led autos higher with a rise of 3.6% on speculation about the future of its Chrysler unit. Among mining stocks, Rio Tinto added 1% and BHP Billiton climbed 1.7%. The French CAC-40 advanced 0.5%, the German DAX 30 rose 0.4%, and the U.K. FTSE 100 gained 0.4%.

[R]1:00PM NY European markets finished higher on strong autos, miners, and merger speculation.[/R]
European stocks hit multi-year highs on Monday, boosted by strength in the mining sector, a continuous advance in DaimlerChrysler and deal-inspired gains from Swiss reinsurer Converium Holdings. DaimlerChrysler led autos higher with a rise of 3.6% on speculation about the future of its Chrysler unit. Among other gainers in the automotive sector, Peugeot rose 2.1% after UBS upgraded the company, and BMW added 0.7%. Volkswagen rose only 0.4% after it was downgraded at Citigroup. Mining shares also posted gains on the back of steady metals prices. Rio Tinto added 1% and BHP Billiton shares climbed 1.7%. Anglo American shares rose 3.3% on news that it is planning to repurchase $4 billion of shares when it releases its earnings Wednesday. The miner was given further support from reports that Russia''s Polyus Gold has approached the group to buy its stake in gold miner AngloGold Ashanti. Again on the merger-and-acquisition front, France''s largest reinsurer Scor slipped 7.3% after the company made an unsolicited offer of 3.08 billion Swiss francs for Converium Holdings. Swiss reinsurer Converium surged 13% after rejecting the bid. Other stocks contributing to the general advance included Carrefour which rose 3.3% on bid speculation. U.K. supermarket group J Sainsbury gained 1.7% in London following a report that an investment fund backed by Qatar''s government is mulling building a strategic stake in the group. EADS shares gained 2.9% on investment hopes. The French CAC-40 advanced 0.5% at 5,739.90, the German DAX 30 rose 0.4% to 6,987.08, and the U.K. FTSE 100 gained 0.4% to 6,444.40.


[R]9:30AM London was near six-year high on Monday on bid talks, mining stocks.[/R]
The UK market was higher on Monday. The benchmark index, the FTSE 100, was up 29 points at 6,448.4, its highest level since November 2000.

Advancers

Reportedly, Anglo American will announce tomorrow a $4 billion share buyback together with a sharp increase in profits. The news sent its shares higher and the stock gained 2.6%, further lifted by reports that Polyus Gold of Russia could be interested to buy the stake of Anglo American in Anglo Gold. The rest of the sector also moved higher, with Lonmin up 2% and Kazakhmys 2% higher.

Interest from a private equity company boosted supermarket group Sainsbury, higher 2%. There are reports that an investment fund supported by the Qatari government was set to raise its stake in the retailer. There are also news that other reports suggested that the Qatari group had approached Stuart Rose, head of Marks & Spencer, about a combined bid for Sainsbury.

News of potential deals of banks also supported shares. Barclays made gains of 0.3% ahead of full-year results due Tuesday on reports that it was considering selling its credit card operations targeted at risky borrowers. Lloyds TSB, considering the potential disposal of its Abbey Life insurance business, rose 0.4%.

Decliners

On the downside, United Utilities shed 1.8% as Goldman Sachs reduced its rating on the company from neutral to sell. Other decliners were also connected with broker comment. ING downgraded shares in Centrica, down 0.1%, to hold from buy and kept its price target unchanged, while Citigroup chopped shares in publisher Reed Elsevier, down 1.65%, to hold from buy.


[R]8:30AM Asian markets finished mostly higher Monday.[/R]
Asian markets ended mostly up on Monday. China, Taiwan, South Korea and HK were all closed. Many markets across the region were closed for the Lunar New Year. The market in South Korea reopens Tuesday, while HK, Singapore and Malaysia on Wednesday. In Japan, the Nikkei 225 index ended at 17940.09, with a gain of 0.36%. Toyota Motor was a leading decliner, finishing 0.5% lower. Ichigo Of mergers, Asset Management announced it has secured almost enough shareholder votes in support of its bid to block Tokyo Kohtetsu merger with Osaka Steel Co. through a share swap and seek a better swap ratio for shareholders. The position of Mitsui, Kohtetsu main shareholder is not clear yet. Mitsui closed 1.5% higher. Investors in Japan, in Asia and around the world will be awaiting Tuesday and Wednesday when the Bank of Japan holds a regular meeting to review interest rates.

The other two major stock exchanges that traded today finished mixed. Australian S&P/ASX 200 ended with a 0.61% gain to 5,990.10, while New Zealand NZSX-50 lost 0.94% to close at 4,140.21.


[R]8:00AM NY-7:00PM Mumbai Sensex advances Monday on buying in large-caps.[/R]
The Sensex on BSE ended 47.35 points, or 0.33%, higher at 14,402.90. The market-breadth was positive, although, earlier in the session was much stronger. Small and mid-cap stocks rallied. As 1,340 shares advanced, 1,303 declined and 56 stocks remained unchanged. Of the 30 stocks in the Sensex, 16 declined, while the rest advanced. The turnover on BSE was Rs 4,204 crore, compared to Rs 4,266.54 crore on Thursday. On NSE, the turnover was Rs 7,762.21 crore, lower than Rs 10,025.11 crore on Thursday.

Economic and corporate news

The government intends to liberalized limits on the compulsory reinsurance by general-insurance companies. The government hopes that this will reduce operating expenses and insurance premiums. The government wants to bring down slowly the compulsory reinsurance that companies are required to carry out with national reinsurer General Insurance Corporation of India to 10% from the current 15%.

The Tata group preparing to launch the largest Indian junk bond issue in the overseas markets, expected to be between $2.6 billion and $3 billion in size, to repay loans from other banks. Junk bonds are high yield debt instruments used to finance takeover of companies.

Trading highlights

GBN was the most active stock with a turnover of Rs 296 crore followed by Redington and HDFC Bank

Advancers

Private sector ICICI Bank led the advancers, up 3.12% to Rs 978. Maruti Udyog surged 2.56% to Rs 914.70, on a cut in petrol and diesel prices last week. IT large-cap TCS advanced 1.53% to Rs 1,310, on intense buying as the software exporter secured an overseas order last week. Tata Steel was up 1.11% to Rs 447, ITC gained 0.66% to Rs 175, and SBI ended up 0.52% to Rs 1,129.

Index heavy Reliance Industries advanced 0.72% to Rs 1,417. Reliance Industries announced on Thursday, its board will meet on February 24 2007 to review plans to raise $2 billion, and consider possibilities for generating more funds to finance its interests.

Shares of Bharti Airtel surged 2.41% as the group announced that it would invest up to $2.5 billion by 2015 in its retail venture with Wal-Mart. The retail industry in India has seen a sharp rise in investments. Reliance Retail, Bharti, Essar, Pantaloon, Birla, Tata and Goenka groups have announced several large investment plans. The industry has attracted attention from several international discount retailers but the lack of infrastructure and high cost of real estate have been daunting for even the largest companies.

Decliners

Hero Honda led the decliners, off 3.71% to Rs 716. Gujarat Ambuja Cements declined 3% to Rs 132.40, Hindalco shed 2.31% to Rs 148, and Reliance Communications was off 1.37% to Rs 460.10. L&T dipped 0.12% to Rs 1,690, after hitting a high of Rs 1,717.90. The engineering and construction large-cap announced on Monday it had secured a $ 250 million contract to set up offshore platforms and related amenities.


[R]6:30AM Europe advances Monday on bid perspectives from DaimlerChrysler.[/R]
European stocks were higher on Monday. In early trade, Frankfurt Xetra Dax added 0.3% to 6,980.81, the CAC 40 in Paris gained 0.2% to 5,725.23 and London FTSE 100 climbed 0.3% to 6,436.5.

Advancers

DaimlerChrysler gained 3.4% after reports it had received expressions of interest for its Chrysler unit. As potential bidders for the Chrysler unit emerged General Motors and Hyundai, should the German parent company put it up for sale. Other auto stocks were also making progress, with Peugeot shares up 1.4% in France after UBS upgraded the company to neutral from reduce and BMW shares up 1.5% in Germany. Sainsbury shares were up 2% on talk state-owned private equity group Qatar Investment Authority was considering investing in the UK third largest supermarket group. France Carrefour gained 2.6%. Mining shares, which mostly trade in London, were generally higher on Monday as gold prices stayed firm. Rio Tinto shares rose 0.9% and BHP Billiton shares climbed 0.7%.

Decliners

Shares in Norwegian oil and aluminum producer Norsk Hydro slipped 1.2%. The company announced on Monday that Q4 net income fell to $216 million from due to a write-down of $836 million related to its Front Runner field and nine shelf fields in the Gulf of Mexico.

Oil and gold

Oil slipped on Monday to around $59 a barrel, pressured by expectations for warmer weather in the United States and supported by threats to supply in Nigeria. U.S. crude for March delivery was down 30 cents at $59.09 a barrel at 1042 GMT. London Brent crude for April was trading down 4 cents at $58.91 a barrel. Gold opened Monday at a bid price of $671.00 a troy ounce, up from $664.30 late Friday.

Currencies

The euro was little changed Monday against the U.S. dollar on a day that U.S. markets were closed for the President''s Day holiday. In morning European trading the euro bought $1.3138, barely up from $1.3137 in New York late Friday. The pound fell to $1.9501 from $1.9511 as disappointing British retail sales continued to weigh on the currency. The yen remained strong, buoyed by news of strong Japanese economic growth and rising sentiment the country''s central bank would likely raise its key interest rate from 0.25 % later this week. The dollar bought 119.63 yen -- compared with 119.26 on Friday.