Europe Closes Higher

European stock markets closed higher on Friday on M&A activity

European stock markets were higher on Friday. In London, the Financial Times-Stock Exchange 100 gained 33.20 points, or 0.68%, to close at 4941.50. The FTSE held onto gains on hopes of mergers and acquisition activity and a strong third-quarter result from British Airways. Wall Street was trading higher at mid-day, helped by bullish comments on semiconductor group from Prudential and Greenspan said market forces poised to stabilize. At home, M&A talk continued to drive the market up. This time it is the turn of Allied Domecq, with French beverage company Pernod Ricard reportedly interested in making a bid. Both companies declined to comment. BA reported third-quarter profits higher than expected. The company also said January passenger numbers moved up 8.1% year-over-year. British Telecom lead the telco sector higher following the completion of its Albacom acquisition, while Vodafone rose 0.73% and Cable & Wireless fell 0.4% after Morgan Stanley recommended a switch into both stocks from Virgin Mobile. Shell was up 2.54% after a number of brokers increase their price targets.

Germany's DAX gained 57.64 points, or 1.35%, to close at 4339.25. Frankfurt recovered to close nearly 1.4% better after a largely lacklustre session sprung into action late in the day after Wall Street shrugged off lower-than-expected non-farm payroll numbers to push higher. Tech stocks led the Friday charge, reacting favourably to a U.S. chip sector upgrade by Prudential Bach. European tech stocks were also helped by a broker upgrade of Texas Instruments. Markets reacted impassively to news the U.S. jobs market only grew by 146,000, lower than the forecast 190,000. But with markets refusing to fall, short covering ahead of the weekend succeeded in driving stocks higher across the board. Among German stocks on the move today, Continental led the rally on promising fundamentals and signs of improving profitability from its U.S. operations. Deutsche Bank continued yesterday's gain following solid fourth-quarter results, reaping its rewards in the form of several upgrades from brokers, including Morgan Stanley, which upgraded the stock to overweight. Henkel benefited from an other broker upgrade, while Schering added 2.5% to yesterday's gains following the decision to sell its thrombosis rights to Pfizer. Tech stocks SAP and Infineon enjoyed a bounce after weakness endured earlier in the week on the back of weak numbers from peer Alcatel. On the downside, Metro closed weaker on the day.

In France, the CAC-40 gained 29.07 points, or 0.74%, to close at 3958.01. Paris ended Friday's session modestly higher, shaking off a mid-afternoon lull. Shares were encouraged back over the gain-line by a solid performance from Wall Street, which was guided by an upgrade of the semiconductor sector by Prudential. At the time of writing, the Nasdaq was up 0.66% and the Dow was 0.38% higher. At home, support came from Total (+1.1%), Bouygues (+4.2%) and Vinci (+3.2%). The latter published consensus-topping sales numbers, and also disclosed that visibility for 2005 is excellent. This went some way to boosting prospects for Bouygues. On the M&A front, Pernod Ricard is said to be studying a possible bid for UK beverage group Allied Domecq. France Telecom is one of four major European groups vying for control of Cesky Telecom. A statement on the tender will be issued on Monday. Alcatel held steady after losing close to 14% yesterday. The stock was subject to a number of earnings, target and rating downgrades following a disappointing fourth-quarter 2004 performance and lower margin guidance for 2005.

Asian markets were mixed on Friday. Japan's Nikkei 225 was lower 28.95 points, or 0.25%, to close at 11,360.40. Investors were cautious ahead of U.S. jobs data and the announcement due after Japan's close. Toyota Motor's results failed to impress the market, with its shares down 0.25% to 4,050 yen. UFJ Holdings sank 3.54% to 572,000 yen on concerns that the company might accept an unfavorable merger off although the company reported a solid 288.6 billion yen in profit for the third quarter.

In Hong Kong, the benchmark Hang Seng Index edged up 69.84 points, or 0.52%, to 13,582.83, on eased rate hiking fears. China Unicom rose 3.17% to HK$6.50 on news that China Telecom and China Netcom have shown interests in acquiring networks from the cellular carrier. PCCW climbed 2.31% to $4.425 (hong kong) on revived sentiment. Among laggards, CNOOC fell 1.91% to $3.85 (hong kong) while Cathay Pacific slipped 0.72% to $13.75 (hong kong).

Canada's benchmark TSX/S&P gained 54.57 points, or 0.59%, to close at 9,358.28.

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