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Monday July 05, 01:51
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European bourses extend losing run
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The four-session sequence of losses in the FTSE Eurotop 300 index looked likely to be halted for much of Monday as a fresh burst of strength in crude oil prices, viewed as potentially damaging to the global economy, ensured investors mostly remained on the sidelines.
But a gradual deterioration in sentiment saw the FTSE Eurotop eventually settle with a 0.1 per cent decline at 988.03. Frankfurt’s Xetra Dax was 0.1 per lower at 3,995.73, the CAC-40 in Paris was 0.1 per cent higher at 3,688.18 while London’s FTSE 100 shed 0.1 per cent to 4,403.3.
That "stay away" stance was emphasised by the absence of any significant US interest in European markets because of the closure of Wall Street for the July 4 Independence Day celebrations.
And it was widespread gains in European oil shares that kept the benchmark index in positive territory as well as promoting the oil and gas sector towards the top of the sector performance table, second only to a buoyant mining area.
The trigger for the oil price rise came from the sabotage attacks on Iraqi oil pipelines over the weekend, with the obvious implications for short term global oil supplies.
Among the individual oil stocks Norway’s Statoil was the top performer in the sector, its shares climbing 1.7 per cent to NKr88.25, followed by Spain’s CEPSA, up 1.4 per cent to €27.63, Norway’s Norsk Hydro, 1.2 per cent firmer at NKr452, Italy’s ENI, up 1.11 per cent to €16.51 and Spain’s Repsol, whose shares edged up 0.7 per cent to €17.93.
In its latest review of the Pan-European oil sector, Merrill Lynch said: "At the sector level we remain on our recent cautious tack; our themes are demanding valuation, peaking earnings and a view that consensus now appears to be fully up with macro events in sector earnings forecasts".
Also prominent on the upside was the telecoms sector where the top individual showing came from France Telecom, whose shares moved up to finish 0.9 per cent stronger at €21.08, in response to bullish news on this week’s flotation of PagesJaunes, its directory business.
Reports said all the stock being offered to institutional investors had been taken up with the final price to be set on Wednesday. Trading in the stock is expected to start on Thursday.
France Telecom is selling between 30 and 43 per cent of PagesJaunes, and set an indicative price range of €13.2 and €15.2 for institutional fund managers. For retail investors the price range was indicated at between €12.9 and €14.9.
Deutsche Telekom was not far behind France Telecom, its shares settling 0.5 per cent ahead at €14.32, after Credit Suisse First Boston upgraded its recommendation on the stock to "outperform" and increased its price target to €17.5 from the previous €17.
"We are raising our rating on Deutsche Telekom reflecting continued growth potential in T-Mobile US and relative stability in the European mobile and wireline assets", CSFB said.
"Having visited T-Mobile US last week we are upgrading our 2006 estimate of T-Mobile US ebitda by 18 per cent and T-Mobile group ebitda by 2.2 per cent", it continued.
On the downside in the sector, however, was Tele2, the Swedish telecoms group whose shares lost 1.5 per cent to SKr323, following a downgrade by Handelsbanken, which shifted its rating to "reduce" from "accumulate", citing the stock’s big premium to its peers.
The banks sector was alive with news and shifts in broker recommendations.
Credit Suisse First Boston told its clients that "the prospect of a turn in European interest rates is a positive for banks with the Spanish and Italian banks the best positioned".
"Contrary to the usual rule of thumb we believe that raising rates will be a net positive for the sector, signalling a return to more levels of growth and offering the chance of alleviating the pressure on liability spreads that has squeezed margins", the broker’s David Raye said.
CSFB highlighted Spain’s Banco Popular, Italy’s Banco Popolare di Verona E Novara and Sweden’s Nordea as providing the best opportunity for exploiting the rising rate theme. It lifted its rating on the Spanish bank to "outperform" and helped the shares rise 0.3 per cent to €45.85.
Italy’s Banca Nazionale del Lavoro added 0.8 per cent at €1.9130 after a report that building and media entrepreneur Francesco Gaetano Caltagirone was seeking to increase his stake in the bank to 5 per cent now and to 15 per cent later in the year.
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