European Indexes Lose Steam

Not all the European indexes could sustain the morning's gains

From Standard & Poor's European MarketScope

European indexes gained Wednesday morning as US futures suggested that Wall Street will see the consolidation of Tuesday's new record closing high for the DJIA. Oil prices were stable ahead of weekly EIA inventories.

UK: The FTSE index remained broadly higher at mid-session, with breadth 7-2 positive. In the UK, BoE minutes from the Dec. 7 meeting showed a unanimous decision to keep current rates at 5.00%. On the corporate news front, the European calendar is light, but a few second-liners provided some action in the UK, in particular British Energy (-6.14%) as it delayed the restart of its nuclear plants.

HMV (-3.47%) guided to fiscal year profits at the bottom end of its range as product markets will remain difficult during the balance of the financial year, it says. Wimpey (-1.41%) said trading conditions in the US have continued to be poor. Hence, it is reviewing its land and option carrying values there. LSE (+0.31%) remained in focus after Euronext shareholders agreed to a takeover by NYSE (NYX).

The Times newspaper, citing CEO Clara Furse, reported that LSE would consider an offer if the right price was on the table. In the FTSE, Wolseley (+0.26%) announced six further acquisitions for £27 million. BT (BT) (+2.78%) gained on news that its S&P credit rating has been unaffected by pension deficit news. Experian (+1.87%) was supported by an upgrade at Morgan Stanley.

France: The CAC 40 index (+0.61%) remained comfortably higher, with 17-2 positive breadth. Wall Street was poised to extend gains amid activity in the tech sector as Ericsson agreed to buy a network hardware company. At home, EADS (+2.56%) flew sky-high as it won a US$2.7 billion Singapore Airlines order for A380s. Separately, a consortium of more than ten banks has agreed to buy a 7.5% stake in EADS from DaimlerChrysler (DCX), the FT reported.

Strong support for the CAC also came from Arcelor-Mittal (+1.44%). It acquired Mexican long steel producer Sicartsa in a deal worth US$1.439 billion. Separately, it is bidding for Russia's MMK, the Vedomosti newspaper wrote. Carrefour (-0.72%) may bid for Turkish retail stores owned by Fiskobirlik, a group that represents more than 200,000 farmers, Askam newspaper reported. GDF (-0.50%) and Suez (+0.40%) may struggle to complete their proposed merger before French presidential elections in May, the WSJ said, citing GDF's CEO.

A Paris judge has launched an investigation into allegations that Total (TOT) (+0.46%) paid bribes to win a US$2 billion gas contract in Iran almost a decade ago, the FT reported. France's telecommunications regulator has started an investigation into France Telecom (FTE) (+0.77%) over access to its fiber optic cables, Les Echos said.

Germany: The Xetra-Dax index (+0.61%) remained in fine fettle at mid-session Wednesday. In Frankfurt, RWE (-0.8%) has received a formal warning over 2005 emissions trade from the German cartel office. If the anti-trust view that RWE overcharged industrial customers last year is maintained, then RWE may see claims coming its way. E.on (EON) (-0.94%) was also expected to get a warning.

Continental (+0.56%) plans to raise tire prices in 2007 after a marked increase in raw materials costs. But CEO Manfred Wennemer told Sueddeutsche Zeitung that he sees the latter falling next year. A consortium of more than ten banks has agreed to buy DaimlerChrysler's (DCX) 7.5% (+1.9%) stake in EADS, the FT reported. Linde (+0.7%) is offloading its Australian gas activities to Wesfarmers Energy Ltd at an enterprise value equivalent to around €300 million.

Morphosys (+7.99%) has extended its antibody cooperation with Pfizer (PFE) until the end of 2011. Medigene (+4.76%) will build its own sales force to market its own and licensed products in selected European markets. Escada's (+5.01%) fiscal year EBITDA rose a better-than-expected 13.8% to €74.1 million. The outlook statement was one that expresses optimism for the year ahead. Key on the broker front, Leoni (-3.49%) took a knock as Deutsche downgraded the stock by two notches to sell.

Elsewhere: At mid-session Piazza Affari continued to build on gains as Nordic indexes traded in the black.

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