Sun, Dec 21, 2003 - Page 10 News List

European markets end week at 15-month high

ACCOUNTING WOES Although the euro's continued strength and Parmalat's troubles kept market gains limited, most benchmarks gained on firm economic data


Danish drugmaker Novo Nordisk helped European stock markets end the week at 15-month highs, but the feisty euro and accounting woes at giant food group Parmalat kept market gains limited.

Heavily weighted energy stocks Royal Dutch/Shell and BP rose, spurred by Brent crude oil prices near nine-month highs, while a note from ABN AMRO telling clients that Cable & Wireless looked cheap buoyed the British telecoms stock.

But Rhodia slumped 8.8 percent to a lifetime low amid talk its bondholders in the US may ask the loss-making French chemicals firm, currently in the midst of restructuring its 2.1 billion-euro (US$2.6 billion) debt, for an early repayment.

The FTSE Eurotop 300 index of pan-European blue chips ended the Friday session 0.3 percent higher at 947 points and the narrower DJ Euro Stoxx 50 index added 0.4 percent to 2,725 points, their best close since Sept. 11 last year.

The benchmark Eurotop ended the week 1 percent higher than it started, bringing to 10.5 percent its total gains since the start of the year.

Sentiment remained supportive for equities after this week's raft of economic data showed recovery was on track on both sides of the Atlantic, although worries that the strong euro could compromise a pickup in earnings capped investors' enthusiasm.

"This week's economic data backs scenarios of economic recovery in the United States, but also in Europe where some forecasts are revised on the upside," said strategist Jean-Francois Himber at broker ETC Pollak Prebon in Paris.

Himber and other strategists said these fundamentals should set the stage for fresh equity gains when trading resumes in the new year, provided the euro did not rise much beyond its current level.

Volkswagen, Europe's biggest carmaker, said on Friday it had raised its hedging level to protect it from the euro's strength against the dollar, as unfavorable exchange rates eat into earnings from exports to the US.

By 5pm, the euro was at US$1.2380, off Thursday's lifetime peak of US$1.2440 but still some 18 percent above the level at which it started the year.

Worries over how the US would finance its gaping current account deficit continued to erode confidence in the dollar.

But market watchers said faster economic growth in the euro zone could for now help to counteract the impact of the strong euro on European companies' revenues.

The dollar's moderate rebound on Friday -- which traders attributed to profit-taking on the euro and said did not call into question the bearish trend for the greenback -- helped exporters such as Thomson, which closed 3 percent higher.

Around Europe, London and Frankfurt closed higher while Paris and Zurich ended flat.

In New York, the blue-chip Dow Jones Industrial Average was up 0.1 percent but the technology-heavy NASDAQ Composite Index was down 0.5 percent amid volatile trade, as investors rushed to adjust their positions during "quadruple-witching," when four different types of options and futures contracts expire.

Shares in Italy's biggest food group, Parmalat, dived 66 percent on the Milan bourse after it announced a 4-billion-euro hole in its finances.

"It is difficult to see how Parmalat can keep going after this clear indication of extensive financial irregularity," said ABN AMRO credit analyst Claire McGuckin in a note to clients.

The shares fell to 0.30 euro on Friday from 2.24 euros last week, deflating its market capitalization to some 245 million euros from about 1.8 billion euros as its financial crisis snowballed.

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