European Indexes Gain

Dealflow and earnings provided focus Thursday morning

From Standard & Poor's European MarketScope

European indexes were buoyant Thursday after a weak performance Wednesday. WTI was at US$52.11/bbl ahead of oil inventories. US futures were mixed ahead of quarterly earnings from IBM (IBM) and Merrill Lynch (ML).

UK: The FTSE 100 index traded in positive territory at mid-session helped by good commodity prices and a rebound in the oil price. Among commodities, gold touched a two-week high, while copper was firm. Nickel touched a fresh high on the LME, hit by supply issues. Locally: Kesa Electricals (+1.53%) unveiled a 7.3% rise in Christmas sales.

Misys (+5.06%) saw a fall in first half earnings, saying healthcare performance was unacceptable. The software firm said Tom Skelton has resigned as CEO of Healthcare Systems. In other news, Enterprise Inns (+3.17%) surged on a positive view by Deutsche Bank. Essar, which owns a third of Hutchison Essar, is determined to buy the remaining stake itself and does not want to partner with Vodafone (VOD) (-0.34%), The Economic Times reported.

The US Department of Health and Human Services has reportedly awarded US$132.5 million in contracts to GlaxoSmithKline (GSK) (+1.43%), Novartis (NVS) and Iomai for the production of influenza vaccines that could be used in the event of a bird flu pandemic. LSE (+0.46%), which is battling a hostile Nasdaq takeover, raised its share buyback program to £250 million. Enterprise (+1.62%) said it has rejected a £5.75/sh offer from private equity, but talks were on.

France: The CAC 40 index (+0.59%) continued to trade higher at mid-session. AGF (+1.36%) was boosted by news that Allianz (AZ) intends to take over 42.4% of the shares in AGF that it does not yet own. AGF said it welcomes the Allianz bid. The deal is reportedly worth around €10 billion.

Among those reporting, Alstom (+2.61%) posted nine months sales of €14.3 billion, +34%; third quarter sales of €3.42 billion, +15%. Accor (+1.68%) disclosed fiscal 2006 sales of €7.6 billion, +6.6%; fourth quarter sales of €1.97 billion, +7.8% like-for-like. Remy Cointreau (-1.17%) reported nine months sales of €610.5 million, +2.2% like-for-like; +0.2% on a published basis.

Vinci (+1.90%) saw sales growing 7% a year for the next three years, Chairman Yves-Thibault de Silguy told, reportedly. Areva (-0.64%) received a letter of intent from Finland's nuclear operator for a second nuclear reactor, Challenges weekly magazine reported on its web site. On the broker front, Dexia (+3.84%) jumped as Exane BNP Paribas upgraded the company to outperform from neutral, reportedly.

Germany: Breadth in the Dax index was a positive 21-9 at mid-session, as investors awaited US December CPI numbers due at 13:30 GMT. In Frankfurt, carmakers supported the index: BMW (+1.5%), DaimlerChrysler (DCX) (+1.22%), Volkswagen (+0.97%). In the news, Allianz (-0.95%) said it intends to take over 42.4% of the shares in AGF that it does not yet own and pay €87.5 in cash and an additional €0.25 Allianz shares for one AGF share. It also wants to buy 9% in Allianz Lebensversicherungs-AG.

Merck (-0.32%) reported quarterly operating profit of €303.3 million, up 58% year-over-year, topping consensus estimates. Sales rose 9% to €1.63 billion. Net income was €129.5 million. Adidas (+0.32%) has reiterated its forecasts for 2006 and 2007. It expects net profit of around €480 million to €490 million.

On the broker front, UBS upgraded Beiersdorf (+2.03%) to a buy, raising its target. In addition to the upgrade, traders mentioned that rumors are circulating that Colgate-Palmolive may be eyeing up Beiersdorf.

Other broker action: UBS raised Henkel's (+0.57%) target to €130 from €111, keeping its neutral rating, reflecting the broker's increased confidence in the company's 3%-4% sales growth target. Deutsche Boerse (+1.84%) was firmer after Citigroup raised its target on the stock.

Elsewhere: The SMI index remained higher into the afternoon session, but several more stocks have succumbed to the profit takers.

Oslo took the lead at mid-session on Thursday, rebounding from yesterday's fall. Stockholm and Copenhagen were flat, while Helsinki traded a tad lower.

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