Corporate deal-making hopes lift European markets

[February 04, 2010]  LONDON (AP) -- European stocks markets rose modestly Monday as speculation of a pickup in corporate deal-making helped offset earlier losses in Asia while Wall Street was to remain closed for the Martin Luther King public holiday.

The FTSE 100 index of leading British shares was up 31.14 points, or 0.6 percent, at 5,486.51, with shares in International Power PLC leading the advance -- up 5 percent -- following weekend speculation that GDF Suez is preparing a bid for the company.

Meanwhile, GDF shares in France were up 1.5 percent, helping the CAC-40 rise 18.26 points, or 0.5 percent, to 3,972.64, while Germany's DAX was 32.51 points, or 0.6 percent, at 5,908.48.

Shares in candy maker Cadbury PLC in London were also marked up around 1.5 percent in London on weekend newspaper reports that Kraft Foods Inc. was preparing to sweeten its offer for the British company.

Analysts said there are mounting expectations that the amount of mergers and acquisitions taking place will increase over the coming months as the global economy recovers from recession. One corollary of increased confidence is an increase in mergers and acquisitions.

And companies considering doing deals won't want to leave it until too late if they think that the ten-month bull run in equity markets continues as the recovery becomes entrenched.

"As equity prices continue to move higher the opportunities to make smart acquisitions could become more limited, so a flurry of M&A activity could well be expected in the coming months," said Anthony Grech, market strategist at IG Index.

With Wall Street closed later to commemorate the life of the civil rights leader and economic news limited, investors think the rest of the session will prove to be lackluster.

When Wall Street returns on Tuesday, the focus will turn towards the next batch of fourth quarter corporate earnings figures, including those from Citigroup Inc. and IBM Corp.

So far, earnings have been fairly mixed, with upside surprises from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc.

A meeting of the 16 finance ministers of the countries that use the euro in Brussels later -- after stock markets have closed in Europe -- will be closely monitored in the currency markets though.

The main topic of debate will be the shaky state of Greece's public finances and the measures planned by the new Socialist government to rein in borrowing over the coming years.

Concern about Greece's debts has been one of the reasons why the euro has floundered over the last month or so from 16-month highs above $1.50.

"It seems that Greece is heading for a crisis that will seriously test the strength of the eurozone," said Rob Pike, a trader at Spreadex.

"It is uncertain whether the eurozone has the stability to resist this since a default by Greece could signal an increase in pressure on other member states via increased borrowing costs," said Pike.

The euro had recovered its poise somewhat ahead of the meeting, trading 0.3 percent higher at $1.4377.

Meanwhile, the dollar was 0.1 percent higher at 90.84 yen.

Earlier in Asia, Japan's Nikkei 225 stock average ended 127.02 points, or 1.2 percent, lower at 10,855.08 while Hong Kong's Hang Seng fell 194.15 points, or 0.9 percent, to 21,460.01. Markets in Singapore and Taiwan also lost ground.

Other markets fared better, with South Korea's Kospi gaining 0.6 percent to 1,711.78 and Australia's stock measure adding 0.2 percent and Shanghai's index rising 0.4 percent.

Oil prices rose modestly, with benchmark crude for February delivery up 35 cents at $78.35. On Friday, the contract slid $1.39 to settle at $78. The price was down $4.75 for the week after declining for five straight days.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.