European Indexes Climb in Afternoon Trade

There were large gains in the oil, defense and mining sectors while Premiere fell in Germany

European indexes built on the morning's gains. US markets opened higher on M&A news (Seagate/Maxtor) and hopes that there could be a Christmas rally. Crude remained comfortably above US$58.0 as EIA inventories showed a steeper-than-expected fall in distillates.

United Kingdom: The FTSE 100 index ended higher, with 7-3 positive breadth and key support from energy, mining, a recovery in banks and confirmation of a major deal benefiting BAE Systems (+6.40%). The pound fell slightly after minutes from the Bank of England showed committee member Nickell had voted for a cut in interest rates earlier this month. Royal Dutch Shell (RDS )(+1.20%) and BP (BP )(+0.81%) rose on crude prices.

Miners also sustained gains as gold prices were back on the rise after recent pause: Rio Tinto (+2.46%); BHP Billiton (+1.55%). The latter was also higher on news of an oil discovery in the Gulf of Mexico. BAE Systems topped the FTSE charts on confirmation Saudi Arabia will sign a Eurofighter contract.

Among fallers, Compass (-1.59%) was a sore point today as Citigroup was said to have placed nearly 30 million shares in the group at £2.16. Neither Compass nor Citigroup commented on the matter. A share price below £2.16 suggested the placement may have not gone very well. On the broker front, CSFB raised the target price of Hanson (+2.84%) to £5.20 from £4.90.

France: The CAC 40 (+1.04%) closed on a fresh year-high, mirroring other major European markets. Breadth was assuredly positive at 38-2. In PAris, Technip (+3.65%) was one of the best performers after its joint venture with Chiyoda landed a €3.3 billion contract in Qatar for two LNG trains.

Defense stocks were also higher against a background of consolidation talk. EADS (+2.14%) rallied on reports of a Saudi order for Eurofighter jets, which was confirmed by the UK embassy in Riyadh in the late afternoon. Earlier, DaimlerChrysler (DCX ) had said it does not exclude a sale of its 30% stake in the company.

Thales (+3.60%) stormed back from three days of losses after a DCN win of a €406 million order yesterday. Investors had heard the day before that EADS's CEO told the Senate a tie-up between EADS and Thales makes strategic sense. Infogrames (-2.86%) was the day's worst performer, hit by a profit warning from Electronic Arts (ERTS ). Peer Ubi Soft (-1.51%) narrowed earlier losses of 6%.

Germany: Xetra-Dax ended Wednesday's session comfortably higher. Key for Adidas, (-0.71%), Nike (NKE ) posted results after the bell Tuesday. The world's No. 1 sportswear group posted a 15% jump in quarterly profit amid solid US demand for high-end athletic footwear, but global orders and gross margins disappointed. Bayer (BAY )(+2.76%) was marked higher after the FDA approved its Nexavar kidney cancer drug. In another development, Europe's competition authority has fined Bayer €58.9 million for being part of a rubber chemicals cartel.

VW (-0.76%) is selling its IT business Gedas to T-Systems, a unit of Deutsche Telekom (DT )(+0.43%), for an undisclosed sum. Siemens (+0.15%) (SI ) has offloaded part of its SBS unit to Fujitsu Siemens Computers for an undisclosed sum. It expects a one-time positive effect in second quarter from the transaction.

Premiere (-41.75%) slumped on losing the right to broadcast German football matches on its channels, with the German Football League (DFL) having awarded pay-TV rights to Kabel Deutschland. The Bundesliga Internet rights go to Deutsche Telekom. EM.TV's (+11.47%) DSF unit was awarded TV rights after 2006.

Elsewhere: In Milan, Piazza Affari ended on a high note Wednesday as insurance, energy and utilities stocks helped the SPMIB over the 35,800 mark, and to new year-highs. Breadth was 30-10 positive. Autostrade (+1.14%) is ready to launch a €1 billion bond to repay all its debts for ANAS concessions, and fund new investments, wrote Finanza & Mercati. AEM Milano (+1.22%) reportedly aims for a deal to boost its stake in Swiss peer Atel by the end of February or will sell its existing stake in the utility.

The SMI (+0.41%) also ended Wednesday's session comfortably higher. Swisscom (SCM )(+0.92%) will be allowed to take stakes in foreign companies as long as the target is not a provider of basic telephone services in a particular country, the government's new four-year plan stipulates, which is a lifting of a previous total ban. Novartis (NVS )(-0.59%) stands by its offer to pay US$45/share (US$5.1 billion) for the remaining 56% Chiron (CHIR )that it does not already own. The disclosure follows news that ValueAct Capital has notified the US SEC of its intention to vote against the sale. ValueAct holds 5% of Chiron's shares.

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)