European Indexes Gain in the Afternoon

M&A was the talk of the continent, boosting Danone but weighing down ThyssenKrupp

From Standard & Poor's European MarketScope

After a quiet morning, the major European indexes all registered gains Tuesday afternoon. Wall Street traded marginally higher as durable goods orders came in higher than expected and warm weather kept oil price down. Meanwhile, the euro stayed firm against the dollar as investors anticipate the ECB will raise interest rates this week by 0.25% for the first time since 2003.

Germany: The Xetra-Dax index ended Tuesday's session with comfortable gains. In Frankfurt, a court has stopped the integration of T-Online into Deutsche Telekom (DT )(-0.07%), saying the merger will have to wait until shareholder objections are resolved. Schering (SHR )(+1.62%) is planning a new share buyback program for the next year as cost cutting efforts are going well. Also, the pharmaceutical group aims to raise its dividend payment. Dofasco can still accept better offers, the Canadian steel maker's CEO said after ThyssenKrupp (-0.75%) launched a friendly US$4.1 billion bid for it, trying to outbid Arcelor. Meanwhile, the Krupp Foundation, which currently controls 20.6% of ThyssenKrupp, is considering raising its stake to as much as 25% over the next few years, according to a report in WirstshaftsWoche.

Munich Re (+0.74%) sold 185 million shares in Unicredito, taking its stake in the Italian bank to 4.8% from 6.6%. A worry is that Unicredito may now trim its stake in Munich Re. Degussa (+0.5%) will accelerate the overhaul of its fine chemicals unit after previous attempts to turn around the business didn't bring about the desired success, Westdeutsche Allgemeine Zeitung reported. MTU (-0.08%) is expected to win a maintenance contract for the Austrian air force's fleet of Eurofighter military jets, Focus magazine said.

United Kingdom:The FTSE index (+0.25%) ended trade higher. In London, an in-line trading update from Barclays (BCS )(-1.08%) failed to inspire. The stock fell as growth in costs and lack of scope for earnings upgrades disappointed the market. P&O (+1.03%) agreed to an offer from Dubai Ports World at £4.43 per share, valuing the group at £3.30 billion. Compass Group (+8.1%) reported reassuring fiscal year numbers in line with estimates, with profits down on weak UK performance, poor conditions in Europe, and a reduction of Middle East military business.

Australian group Brambles (+10.24%) unveiled a broad plan to unify the dual-listed companies, focusing on CHEP and Recall. The company said it will sell Cleanaway, and other businesses, as well as carry out a share buyback. Rentokil Initial (+2.38%) sold its Style conference business for £325 million. De La Rue (+3.53%) first half sales, fiscal year expectations and buyback plans all reassured the market, but Game Group (-4.18%) issued a profit warning, amid ongoing like-for-like sales declines, sharp falls in gross margins and lower pretax profit. Royal & Sun Alliance (+2.41%) benefited from an increase in UBS' price target, PartyGaming (+7.76%) soared as Morgan Stanley initiated coverage with an overweight rating.

France: The CAC 40 index (+0.29%) ended Tuesday's session with minor gains. In Paris, Danone (DA )(+1.88%) was the CAC's main gainer as market talk suggested Altria's (MO )unit Kraft may be mulling a bid. Financials also lent support, continuing last week's strong run: Axa (AXA )(+1.01%); BNP (+0.74%). Michelin (+3.47%) rallied on news it will raise tire prices in North America from January to reflect the rise in raw materials. Arcelor (+1.74%) reversed earlier losses, but remained in focus amid concerns of a lofty counterbid after ThyssenKrupp launched a CAD4.8 billion friendly offer for Dofasco.

Oil prices remained subdued, with WTI around the US$57.1 per barrel barrier. Total (TOT )(-0.51%) traded in the red on news it will pay a €5.2 million settlement in Myanmar to fend off accusations of forced labor. Greenback-gainer L'Oreal (-0.74%) was negative. Finally, telecom groups were in focus as Les Echos reported France Telecom (FTE )(+0.5%) Orange, Vivendi (V )(+0.28%) SFR and Bouygues Telecom (-0.56%) could face million euro fines on accusations of market collusion.

Elsewhere: Amsterdam's AEX index (+0.65%) ended the session in fine fettle boosted by the excellent earnings update from Ahold (+6.97%) Tuesday morning. In Amsterdam, Ahold remained by far the best performer after reporting that its third quarter operating profit increased to €258 million, excluding charges announced yesterday.

Piazza Affari managed to keep its head above the gain-line. In Milan, Enel (+1.17%) has reportedly been granted a €5 billion syndicated revolving credit line from 36 banks. It has been markedly oversubscribed. Telecom Italia (+1.27%) is to launch a new IPTV service called Alice Home.

Prepared by Zaida Espana, Valerie Vidal, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, Julien Manrique, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

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