EUROPE MARKETS: European Stocks Hit Six-year High On First 2007 Trading Day
12:00 EST Tuesday, January 02, 2007
(An earlier story was corrected to reflect that the Italian stock market was open.)
European shares rose to a six-year high on Tuesday, the first trading day of 2007, as investors continued to back stocks on the Continent on hopes for more mergers and rising valuations.
"We're off to a great start," said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities, adding that the overall tone for the market seems pretty positive at the moment.
"It's as if all the factors that have been driving equity markets recently -- such as deal making -- are still pretty much in play," he said.
The French CAC-40 indexrose 1.4% at 5,617.71, led by Mittal Steel, Lafargeand Alcatel-Lucent (ALU) .
The French market gains were broad based, with only three components of the CAC-40 trading in negative territory.
Elsewhere, the U.K. FTSE 100 indexrose 1.5% at 6,310.90 and the German DAX Xetra 30 indexincreased 1.3% at 6,681.13.
The pan-European Dow Jones Stoxx 600 indexadvanced 1.3% at 369.86, its top level since December 2000, helped by increases in metals companies including miner BHP Billiton (BHP) , up 2.9%, and banks including Allied Irish Banks, up 4.4%.
The gains came on below-average volumes, as U.S. markets were closed to observe a day of mourning for former President Gerald Ford, who died in the past week at age 93.
The stock market in Switzerland also remained closed on Tuesday.
Other strategists said that they also expect the positive market tone to continue throughout the year.
"In 2007, we expect the market to continue to rise. It's unlikely to be as strong as last year in Europe but close to 10% (gain) we think is quite likely," said Patrik Schowitz, a European equity strategist at HSBC.
Schowitz said that continued M&A in Europe has made taking big sector stances more of a risk because deals have occurred across a broad range of sectors.
"We might get a bit more cautious on taking big sector bets in the medium term because we don't see the M&A wave stopping any time soon," he said.
One sector in the spotlight at the start of 2007 was the utility sector, however.
Shares of utility companies were some of the best performers in 2006, rising 37%, according to equity strategists at Standard & Poor's, in part as investors became more interested in the M&A potential of these companies.
"Diversification and the acquisition of stable predictable returns were the two primary factors behind the increased interest in infrastructure assets. We expect this trend to continue in 2007," the strategists added.
Of Tuesday's utility movers, shares in Suez rose 1.7% after billionaire French entrepreneur Francois Pinault on Tuesday left himself room to launch a late $92 billion bid for Suez, the world's second largest water utility, as a planned merger between Suez and Gaz de France struggles to move forward.
However, Veolia Environnmentshares weren't doing so well in the sector, backing away from Friday's sharp M&A inspired gains to trade down 4.1%.
Staying with the merger and acquisition theme, shares in steelmaker Corus Group (CGA) rose 1.3% at 535.63 pence after a report that Indian bid suitor Tata Steel could lift its 500 pence a share offer for the company.
The online edition of India's Business Standard reported that could mean a bid of between 535 pence and 550 pence a share for Corus from Tata.
Corus recently received a 515 pence a share bid from Brazil's Cia. Siderurgica Nacional, or CSN.
Also, shares in budget airline easyJetrose 3.9% after a report that Richard Branson of Virgin Group, easyJet founder Stelios Haji-Ioannou, and Datuk Tony Fernandes of AirAsia are in talks to form a global low-cost airline.
According to the online edition of the Star of Malaysia, which cited industry sources, the planned carrier initially would connect Kuala Lumpur with the U.K., the United Arab Emirates and India.
(END) Dow Jones Newswires
01-02-07 1200ET
Copyright (c) 2007 Dow Jones & Company, Inc.
