Sun, Feb 03, 2008 page10

• EUROPE: European markets snap seven-week losing streak

  GAINING GROUND National benchmarks rose in all 18 western European markets except Norway, Austria and Greece on signs that industrials are ready to consolidate

  • BLOOMBERG
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  European stocks had their first weekly gain this year as Alcoa Inc and Aluminum Corp of China's (中國鋁業) purchase of a stake in Rio Tinto Group and Microsoft Corp's offer for Yahoo Inc fueled speculation mergers will increase.

  Rio Tinto posted its biggest weekly gain since November after Alcoa and Chinalco, bought a ?7.2 billion (US$14 billion) stake in the world's third-biggest mining company. France's Societe Generale SA climbed after BNP Paribas SA said it's considering a bid. Mitchells & Butlers Plc advanced after saying suitors have expressed interest in buying the pub owner.

  "These are signals for the market that industrials are ready to seize opportunities to consolidate," said Benoit de Broissia, who helps oversee US$7.4 billion at Richelieu Finance in Paris. "Valuations are attractive."

  The Dow Jones STOXX 600 Index advanced 1.9 percent to 328.41 this week, snapping a seven-week losing streak. The STOXX 50 gained 1.7 percent, and the Euro STOXX 50, a measure for the euro region, climbed 2.4 percent.

  The STOXX 600 currently trades at 11.4 times the average earnings of its members following its worst-ever January. As of last Friday, the gauge traded at 11.2 times average profit, the lowest since at least January 2002, data compiled by Bloomberg show.

  US Federal Reserve Chairman Ben Bernanke reduced the benchmark interest rate by half a point to 3 percent on Wednesday, eight days after an emergency three-quarter point move, the fastest easing of monetary policy since 1990. The Fed left the door open to more cuts by saying in its statement that "downside risks to growth remain."

  "The Fed is going to cut and cut to save the economy," said Philip Manduca, who helps manage about US$500 million at Titanium Capital Ltd in London. "Bernanke knows he'll cut more. He's been late, but boy is he going now. He's catching up."

  National benchmarks rose in all of the 18 western European markets except Norway, Austria and Greece. Germany's DAX Index added 2.2 percent. France's CAC 40 climbed 2.1 percent. The UK's FTSE 100 gained 2.7 percent.

  Rio Tinto jumped 19 percent for its biggest weekly gain since Nov. 9. Alcoa and Chinalco bought the stake in a surprise attempt to derail BHP Billiton Ltd's hostile bid for Rio. Chinalco and Alcoa don't intend to make an offer for Rio after buying the 12 percent stake on the market.

  "Further upside exists in Rio shares," said Michael Rawlinson, an analyst with Liberum Capital Ltd in London. "With the goal of ultimately blocking the deal, further stake building by Chinalco/Alcoa is likely to occur at higher levels."

  Raw materials shares gained the most among the 18 industry groups in the STOXX 600, soaring 11 percent. That's the industry's steepest weekly climb since the period ending on Aug. 24.

  Microsoft, the world's biggest software maker, on Friday made an unsolicited offer to buy Yahoo for about US$44.6 billion, or US$31 a share. The offer is 62 percent more than Yahoo's closing stock price a day earlier, a Microsoft statement said. Yahoo shareholders can choose cash or stock, Microsoft said.

  Societe Generale climbed 19 percent. BNP Paribas, France's biggest bank, on Thursday said it is considering a bid for its smaller rival. Credit Agricole SA, France's second-largest bank by assets, is appointing advisers to explore a possible bid for Societe Generale, according to four people involved in the discussions. Societe Generale last week said a trader's unauthorized bets led to a record loss.

  Mitchells & Butlers surged 15 percent. The owner of the O'Neill's pub chain said on Wednesday an undisclosed number of suitors expressed interest in a takeover.

  Private equity firms TPG Inc, CVC Capital Partners Ltd and Cinven Ltd are among the suitors that approached Mitchells & Butlers, the London-based Times reported on Friday, without citing anyone.

  Meinl European Land Ltd soared 41 percent. The Austrian developer that lost 52 percent of its market value last year had its biggest ever gain on Wednesday after saying it's in talks with "several" potential bidders.
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