Euroshares higher midday as M&A talk continues in telecoms sector

Euroshares higher midday as M&A talk continues in telecoms sector

	Published : Wed, 23 May 2007 12:35 By : Agencies Print this Story

LONDON (Thomson Financial) - Europe's leading exchanges were rising midday on merger and acquisition talk in the telecom sector, with automotive stocks lending further support, dealers said.

At 12.00 pm, the STOXX 50 was up 28.50 points at 3925.85, while the STOXX 600 gained 2.50 points to 395.85.

Looking ahead to Wall Street, US stocks are headed towards a higher opening after a report that Alcan Inc. rebuffed a hostile bid by aluminum competitor Alcoa Inc. raised speculation that alternative offers might be launched.

Futures prices point to a higher open for all major US indexes, which have ended mixed in the past two sessions.

According to IG Index, the DJIA is set to open some 25 points higher at 13,565 after falling to 13,539.95 yesterday.

Back in Europe, merger and acquisition talk equally continues to underpin positive sentiment in the market.

One Frankfurt-based trader said the market was so confident, that every weakness is taken as an opportunity and with takeover rumours emerging from every corner.

Shares in Deutsche Telekom rose on the back of a report that it may acquire France Telecom's Dutch mobile assets and ahead of its AGM, dealers said.

Last week, the German press reported that Vodafone was set to buy Ya.com for about 400 mln eur.

The report, in Spanish newspaper Expansion, sent stocks in the telecommunications sector sharply higher, but sources close to Deutsche Telekom said it was simply a rumour and added that the German large cap was not planning to swap assets with France Telecom.

A trader at SNS Securities said the deal would reduce the number of mobile operators in the Dutch telecoms market to three from four.

'Clearly that would be good news for all mobile players in the market, including KPN,' he added.

Vodafone added 3.8 pct, Deutsche Telekom gained 2.7 pct and the Netherlands' KPN was 2.63 pct higher midday.

Meanwhile, Telenor was pushed on further after Goldman Sachs raised its earnings forecasts on the group following an upgrade of the telecoms group's full-year guidance.

Telenor gained 1.9 pct on last check.

In the automotive sector, a bullish note by Morgan Stanley on DaimlerChrysler pushed several stocks higher, as the broker reiterated its 'overweight' rating, saying the company has the potential to hit 100 eur if it refocuses on its core operations and improves its margins.

The broker currently holds a 75 eur price target on the stock.

The shares gained 2.97 pct midday with Volkswagen also benefiting from the momentum, adding 2.49 pct.

Meanwhile, shares in Peugeot gained in morning trade, but fell again midday as the company failed to hand out a 2007 profit guidance, dealers said.

At last check, the stock lost 1.26 pct.

Meanwhile, pharmaceutical stocks remained low.

'The air is out at the moment,' one trader commented on Altana's weak performance, with the stock dropping 2.33 pct.

On the transport front, AP Moller Maersk were upgraded to 'overweight' from 'underweight' at Morgan Stanley, which upped its target price for the Danish shipping company by 63 pct to 74,000 dkr.

In a note to clients, the US broker said the container cycle has turned earlier than expected and it anticipates 2 pct annual growth in freight rates in 2007 and 2008.

The share gained 4.8 pct midday.

Deutsche Lufthansa was among leading blue chips on the DAX throughout the day, adding 2.00 pct at last check, after HVB upgraded it to 'buy', and with Unicredito raising the target price to 24.80 eur, dealers said.

HVB said Lufthansa is expected to expand its passenger capacity in the course of this year while its cost savings programme could also lead to higher profits.

The German broker upgraded its stance on the stock to 'buy' from 'hold' and raised its target price tp 24.80 eur from 22.25 eur.

Elsewhere, shares in STMicro retreated after Cazenove downgraded the hardware technology company to 'underperform' from 'in-line,' saying its decision to merge its flash memory business with Intel's leaves few positive catalysts for the stock going forward.

Yesterday Intel Corp and STMicroelectronics announced an agreement to merge their flash-memory activities into a new company with annual sales of 3.6 bln usd.

Under the agreement, Intel will take a 45.1 pct stake in the new company and a 432 mln usd cash payment, while STMicro will acquire 48.6 pct of the new business and receive a 468 mln usd cash payment.

patrizia.kokot@thomson.com

pk/rfw

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