Europe Closes Higher

European markets closed higher with the European Central Bank and Bank of England leaving rates unchanged

European stock markets gained on Thursday. In London, the Financial Times-Stock Exchange 100 gained 16.70 points, or 0.35%, to close at 4800.30. The FTSE rose on a positive reaction to trading updates from Reuters, Gus and Sainsbury. U.S. blue chips opened lower despite positive earnings from Apple Computer. Shares of Reuters rose 2.69% after the information provider said underlying recurring revenues for the quarter are likely to drop by around 1.5%, better than analysts forecast, vs. a decline of 8.4% year-over-year. ITV lead the index higher on speculation that U.S. venture capital group KKR may be interested in a bid and reports that advertising revenues may be set to strengthen. Among retail stocks, Gus said Argos like-for-like Christmas sales moved up 1% for the 15 weeks to Jan. 8, with Homebase up 4%. Sainsbury said like-for-like sales for the four weeks to Jan. 1 were down 0.4%, with same store third-quarter sales falling 1.2%. The company said fourth-quarter trading will remain challenging. Carphone Warehouse soared 7.12% after announcing retail revenues rose 11.2% for the 13 weeks to Dec. 25 2004 with like-for-like gross profit up 4.3%, and said it expects fiscal results to beat consensus. As expected, the Bank of England left UK interest rates unchanged at 4.75%.

In Germany, the DAX Gained 3.32 points, or 0.08%, to close at 4212.14. Frankfurt closed slightly higher in quiet trade as the European Central Bank left rates unchanged. With the European Central Bank's growth forecast for 2005 looking optimistic (mid-point of 1.9%) and inflation likely to fall and remain below the European Central Bank's 2% threshold in 2005, expect President Trichet's comments to sound more balanced this month. In Germany, the first estimate of GDP showed that German growth was at 1.7% in 2004 (non-calendar adjusted), up from -0.1% in 2003. Locally, Infineon rebounded 1.47% after initial concerns surrounding a statement saying that first-quarter profit and sales missed analysts' forecasts after inventories rose and the falling U.S. currency crimped sales. Analysts saw nothing too serious. Car stocks fell after VW and BMW warned that continuing weakness in the dollar will hurt the bottom line. BMW also said it cut prices of cars made in China by as much as 14% to compete with VW's Audi model, the Beijing Times reported. MAN recovered some of yesterday's losses after its CEO said it may consider selling unprofitable units. TUI's Hapag-Lloyd Express has booked 15% more passengers for this year's flight schedule than at the beginning of 2004. BASF's jointly owned Basell NV may be sold to a joint venture of four private equity firms for about 4 billion euro.

France's CAC-40 gained 17.97 points, or 0.47%, to close at 3834.11. The CAC40 ended higher, with mixed individual performances, despite the fact Wall Street offered an uninspiring start to trade. The DJIA and the Nasdaq were marginally lower, attempted to consolidate yesterday's gains. U.S. economic data was mixed, with higher-than-expected December retail sales, but worrying weekly employment numbers. In Europe, the European Central Bank left rates unchanged, as expected. In France, Arcelor was amongst top performers as Korean steel giant Posco reported booming sales and profits overnight. But Schneider was the main gainer, jumping 4.65% upon release of its 2005 to 2008 business plan. The plan revealed 2005 to 2008 sales CAGR of more than 5% and operating margin of between 12.5% and 14.5%. Shareholders were also pleased with payouts as Schneider is targeting a dividend payout ratio (before goodwill) of 50% from 2005, vs 39% in 2004. EADS flew 3.53% higher on news it sees 2004 revenues of 32 billion euro and EBIT exceeding 2.3 billion euro, resulting in an EBIT margin of over 7%.

Asian markets were lower or nearly flat on Thursday. Japan's Nikkei average lost ground, shedding 95.17 points, or 0.83%, to close at 11,358.22. Exporters bore the brunt of selling due to a weakening dollar versus the yen. Banking stocks were also trended lower after Merrill Lynch slashed its weighting for major banks to market weight from overweight.

In Hong Kong, the benchmark Hang Seng Index moved rangebound, gaining a mere 7.97 points, or 0.06% to close at 13,573.28. Cathay Pacific rose following the company's announcement of strong December traffic numbers.

Canada's benchmark TSX/S&P lost 13.57 points, or 0.15%, to close at 9,009.14.

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