Sun, Jun 25, 2006 - Page 10 News List

European markets mostly higher on energy shares


European stock markets closed mostly higher on Friday, as a rally in the energy sector masked an otherwise lackluster performance on concerns over global interest rate and economic growth direction.

The German DAX 30 weakened 0.1 percent at 5,529, while the French CAC 40 rose 0.3 percent to 4,817 and the UK FTSE 100 rose 0.1 percent to 5,692.

The energy sector rallied on a wave of US deals, including Anadarko's US$21 billion of oil producer acquisitions, and a positive note on the oil industry from Deutsche Bank, which argued the sector was undervalued.

France's Total rose 2.4 percent; Royal Dutch Shell, which was upgraded by Deutsche Bank, added 1.4 percent; and gas explorer BG Group advanced 2.7 percent.

Citigroup strategists remained optimistic on European stock markets, noting that balance sheets are strong, companies are underleveraged, interest cover is high, cash-flow generation is strong and profit momentum is positive.

Still, the strategists acknowledged that strong equity demand looks unlikely over the coming weeks, so they urged investors to look for companies that can benefit from mergers-and-acquisition activity, leveraged buyouts, re-leveraging and bigger dividends.

One company benefiting from M&A was Associated British Ports, which rose 4.3 percent after agreeing to be bought for ?9.1 a share, or ?2.8 billion (US$5.1 billion) by a consortium led by Goldman Sachs. A consortium led by Macquarie Bank urged shareholders not to take action, raising the prospect the group may again try to match the Goldman-led group's offer, though 3i dropped out of the Macquarie consortium.

Deutsche Boerse fell 1.2 percent after NYSE Group CEO John Thain said in an interview with French newspaper La Tribune that the US exchange has the resources to increase its offer for Euronext if need be. Thought the Euronext has agreed to be bought by the NYSE, the Deutsche Boerse is still interested in buying the operator of stock exchanges in Paris, Amsterdam, Brussels and Lisbon.

Mittal Steel fell 2.6 percent in Amsterdam on increasing media speculation that Arcelor will agree to an improved Mittal offer. Mittal hasn't yet raised its bid but has now agreed with Arcelor on issues over corporate governance and strategy, La Tribune reported.

Arcelor has previously rebuffed the advances from the world's largest steelmaker and agreed to buy Russia's Severstal, in part to thwart the Mittal offer.

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