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European Indexes Rise on Earnings News

From Standard & Poor's European MarketScope

European indexes were up at midday Thursday on strong earnings reports. Bucking the uptrend: Consumer-products giant Unilever (UN) and automakers VW and BMW, all of which posted declines. Strength in U.S. stocks aided sentiment, as Wall Street was cheered Thursday by solid economic data.

Germany: The Xetra-Dax index traded higher by 1.09% after investors on Wall Street Wednesday put aside concerns about rising interest rates and concentrated on solid earnings stories. Across Europe, investors awaited Federal Reserve Chairman Alan Greenspan's testimony in front of Congress later today. In Frankfurt it was earnings reports galore. VW's (-0.8%) core brand lost money in the third quarter, but projected a profit in fiscal 2005. The car maker posted nine months operating profit of €1.96 billion, lower than expected. BMW's (-1.95%) third quarter pretax profit slid more than expected to €647 million (consensus view €739 million) on quarterly sales a touch higher than expected at €11.72 billion. The luxury car maker reiterated that it sees 2005 profit roughly flat year-over-year. Adidas's (+2.71%) third quarter net income beat forecasts, rising 28% to €209 million, when adjusted for the sale of the Salomon unit. Commerzbank's (+1.78%) third quarter net earnings topped forecasts.

Karstadt (+7.1%) reported a rise in core nine months earnings to €158 million, a bit below expectations, on sales 7.8% lower at €8.1 billion. Supporting the stock was an announcement that no capital hike will be undertaken in the short term. Quarterly order intake fell 12% at Aixtron (AIXG) (-8.58%) to €24.9 million, at the bottom end of a wide range of forecasts. The chip equipment maker now sees full-year sales closer to €140 million rather than the €150-160 million previously predicted. Leoni's (-3.9%) third quarter sales rose 22% to €388.2 million, with consolidated net income coming in at €15.5 million. The car supplier reiterated its 2005 sales target. There were no surprises from Hugo Boss's (-0.21%) final third quarter results.

France: The CAC 40 index (+1.56%) was stronger at midday with a positive breadth of 30-9 as investors look for a firm opening on Wall Street. In Paris, rising financials and robust quarterly sales numbers from media plays were the main drivers. HSBC initiated coverage of French banks, starting SocGen (+1.4%) and BNP Paribas (+2.04%) with overweight ratings. In media, Vivendi Universal (V) (+1.57%) posted strong third quarter sales of €4.874 billion, largely thanks to the success of World of Witchcraft videogame. Publicis (PUB) (+0.25%) announced third quarter sales up 7.4% year-over-year to €1.001 billion, and maintained a confident outlook for fiscal 2005 organic growth of at least 6%.

Broader-listed street furniture group, JC Decaux (+1.66%) was positive after signing a 30-year joint venture contract with Beijing's Behua Cultural Development for outdoor advertising ahead of the 2008 Olympic Games. Blue chip construction group, Lafarge (LR) (+0.67%) was in focus after agreeing to terminate its joint venture with CEMEX (CX) in Spain and Portugal. Scor (+1.22%) said hurricanes Katrina and Rita had a limited impact on nine months sales which were up 38% to €83 million.

United Kingdom: The FTSE 100 index extended gains to trade higher by 1.15% in the early afternoon, boosted by strong Wall Street trading. In London, ICI (ICI) (+7.31%) rallied after reporting third quarter sales ahead of forecasts and saying sales growth has been maintained by ongoing progress in increasing prices to recover raw material cost rises. Rentokil (+4%) also gained after saying the rate of profit deterioration is slowing and expects to see a continuation of encouraging trends in the remainder of the year and into first half of 2006.

Unilever (UL) (-4.31%) disappointed as it failed to pass on price increases. Sugar group Tate & Lyle (+6.53%) climbed after beating analysts forecasts at first half. The London SE (+0.44%) posted a 15% increase in first half turnover and said it intends to return £250 million to shareholders. Signet (-7.62%) retreated after saying fiscal year profit will not beat last year's.

Elsewhere: Scandinavian stocks extended gains at mid-session. In Stockholm, Skanska (+4.41%) jumped after posting a net profit roughly in line with expectations for the third quarter, while sales beat forecasts, landing at SEK32.2 billion. Conversely, Sandvik's (-4.88%) figures fell short of estimates, with profit of SEK2.13 billion and sales of SEK15.55 billion. Tire maker Nokian Renkaat (-16.64%) plummeted as its third quarter operating profit fells more than expected to €18.9 million in the third quarter.

In Madrid the Ibex 35 remained higher at midday with corporate results the days main focus. Telefonica (TEF) (-1.0%) announced its withdrawal from the bidding for a 35% stake in Tunisie Telecom. Prepared by Zaida Espana, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

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