Takeover deals support sentiment in world markets

[May 11, 2011]  LONDON (AP) -- Corporate takeover deals and earnings reports supported world markets on Wednesday, helping investors in Europe to set aside worries about the financial future of the region's weakest countries, particularly Greece.

News that Microsoft Inc. would buy Internet telephone service Skype for $8.5 billion in cash signaled that companies were starting to spend -- buoying confidence that stocks would continue to rise.

The takeover would be Microsoft's largest in its 36-year history. It follows AT&T Inc.'s announcement in March that it would buy T-Mobile USA for $39 billion and Johnson & Johnson's $21.3 billion deal announced last month to acquire Synthes, a maker of medical instruments and implants.

The Skype deal also pushed up the share price of Nokia Corp., the world's largest mobile phone maker which this year struck a partnership to make smartphones with Microsoft, on speculation Internet phone service would become a key to its future strategy. Shares in the Finnish company were up 1.9 percent on Wednesday.

Earnings reports from companies in the energy sector -- German utility E.ON AG, Austria's OMV AG and A.P. Moller Maersk in Denmark -- were all strong on Wednesday.

Steel maker ArcelorMittal, however, saw its shares slump 1 percent after it said capacity utilization may now be at a peak and higher interest rates in China could hurt earnings in the future

By late morning, Britain's FTSE 100 index was up 0.2 percent at 6,028.47 while Germany's DAX was 0.6 percent higher at 7,547.36. France's CAC-40 was up 0.4 percent at 4,066.94.

U.S. futures pointed toward a higher Wall Street opening, with Dow futures up 0.1 percent at 12,718 and S&P futures 0.2 percent higher at 1,356.40.

The improvement in market sentiment helped mask worries in Europe about the financial future of Greece, which is still struggling with debt a year after it got a bailout.

European officials say the country may soon be offered more support -- with an announcement possible at Monday's meeting of eurozone finance ministers -- but that more reforms would be attached. EU governments want to make sure Greece implements austerity measures and economic reforms before offering more financial aid.

That has pushed back talk of a restructuring of Greece's debt -- a change in its debt repayment terms -- which could cause large losses for banks across Europe.

Though analysts warn that some form of restructuring may ultimately be required, the prospect of more short-term support for Greece has improved investor confidence somewhat in recent days.

The euro was up slightly at $1.4409 from $1.4388 late Tuesday in New York. The dollar weakened to 80.72 yen from 80.78 yen.

In Asia, Japan's Nikkei 225 rose 0.5 percent to close at 9,864.26. Toyota Motor Corp. rose 0.6 percent after the company, whose operations were disrupted by parts shortages after Japan's March 11 earthquake and tsunami, said efforts to fix production were going better than initially expected.

The quake and tsunami have sorely hurt Toyota, which is expected to lose its spot as the world's top-selling automaker to General Motors Co. this year because of the disasters.

South Korea's Kospi index climbed 1.3 percent to 2,166.63, with Daewoo Shipbuilding & Marine Engineering Co. soaring 8 percent after winning a deal to build an ultra-deep water drill ship for U.S.-based Vantage Drilling Co.

Hong Kong's Hang Seng index shed 0.2 percent to 23,291.80. Australia's S&P/ASX 200 advanced 1.2 percent to 4,780.20. Benchmarks in Singapore, Indonesia and New Zealand were also higher.

Chinese markets were mixed after the country's national statistics bureau released figures showing inflation had eased slightly but still remained higher than expected. Consumer prices in April rose 5.3 percent over a year earlier, driven by an 11.5 percent jump in food costs.

Persistently high inflation has led the People's Bank of China to hike interest rates and take other measures to reduce the amount of money sloshing around the economy. The latest inflation figures could put additional pressure on the central bank to keep controls on lending and liquidity -- resulting in less money to put into stocks.

The mainland Shanghai Composite Index dropped 0.3 percent to 2,883.42 while the smaller Shenzhen Composite Index rose 0.2 percent to 1,212.27.

Benchmark crude for June delivery was down 29 cents to $103.59 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.33 to settle, or 1.3 percent, at $103.88 on Tuesday.

[Associated Press; By CARLO PIOVANO]

Pamela Sampson in Bangkok contributed to this report.

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