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Europe heads higher as equities steady

12/03/2007 12:12
European equity market climbed this week, as investors put the turbulence of recent sessions behind them and focused on merger activity and earnings news.

The FTSE Eurofirst 300 gained 1.3 per cent over the week to end at 1,489.47 on Friday, but still more than 4 per cent off the six-year high hit late last month.

German carmaker Volkswagen was one of the leading performers this week as it took a step closer to forging consolidation in the European truckmaking industry. VW raised its stake in Swedish truck group Scania to 35.3 per cent of voting rights and 20 per cent of the total share capital.

MAN, the German truckmaker in which VW is the top shareholder, owns 14.8 per cent of Scania, and between them, the two German groups own just over 50 per cent of the voting rights in the Swedish company.

Volkswagen, which backed MAN’s bid for Scania last year, has long voiced its approval of consolidation in the sector as it has sought synergies for its Brazilian truck unit and its European commercial vehicles division.

Volkswagen gained 10.5 per cent over the week to €103.05, while MAN added 8.7 per cent to €87.73 and Scania climbed 2.9 per cent to SKr534.

EADS fell on Friday after losses at its Airbus unit caused an 86 per cent drop in full-year operating profits. The European aerospace group said it expected another substantial loss at Airbus this year. EADS shares fell 4.4 per cent over the week to €22.60.

Bid speculation helped retailers as talk of private equity interest re-emerged in the sector. France’s Carrefour rose 3.1 per cent over the week to €53.59 after Groupe Arnault and Colony Capital announced they had jointly built up a 9.1 per cent stake. Speculation intensified after the resignation of chairman Luc Vandevelde over strategic differences with the Halley family, which controls 20 per cent of the voting rights.

Dutch rival Ahold climbed 4.7 per cent to €7.78 on reports it had received a number of offers for its US Foodservice division. Several private equity teams were cited as bidders, including Bain Capital, Blackstone Group and Wellspring Capital Management.

Financial stocks comprised the backbone of the rally, supported by earnings and strong trading updates. Anglo Irish Bank gained 6.1 per cent to €16.34 after it said it expected first-half earnings to be almost 40 per cent higher than last year. This helped its Irish peers, and Bank of Ireland added 1.9 per cent to €17.38, while Allied Irish Banks rose 7.9 per cent to €23.40.

Fortis, the Dutch-Belgian financial services group, gained 3.9 per cent to €32.70 after it unveiled ambitious long-term profit growth targets.

Meanwhile, Dutch insurer Aegon climbed 5.1 per cent to €15.20 after its better-than-expected full-year results prompted a 22 per cent increase in the dividend payout.

Vallourec was the week’s biggest faller on the Eurofirst 300 after its full-year results and 2007 outlook disappointed. The French steel tube maker was one of the outstanding stocks of 2006, gaining 137 per cent over the year. The shares fell 8.4 per cent to €174.98 over the course of last week.