Corus rise helps to put some steel into European blue-chips

Published on Friday 26 November 2004 01:05

EUROPEAN shares ended higher yesterday, helped by hopes of price rises for steel makers and a rally in oil stocks as crude oil prices rose anew.

Credit Suisse was another climber after the Financial Times Deutschland reported that French insurer Axa was interested in buying the Swiss bank’s Winterthur business, which analysts have valued at up to 5 billion (3.5bn). Shares in Axa, which declined to comment, closed 0.7 per cent higher.

The FTSEurofirst 300 index of pan-European blue-chips ended 0.7 per cent higher at 1,030.2 points, only 1 per cent below last Monday’s 28-month peak of 1,040.55 points. The narrower DJ Euro Stoxx 50 gained 0.95 per cent to 2,904.16 points, with generally light trading volumes as markets in the United States were shut for the Thanksgiving holiday.

Basic resources issues were also among the top gainers, with steel-makers cheered by news that Japan’s Nissan Motor had to stop production at some of its domestic car plants due to a steel shortage. Thyssen Krupp, Arcelor and Corus rose between 1.9 and 5.6 per cent.

"Nissan’s announcement is a sign there is a shortage of steel in the market ... and that sort of situation gives more negotiating power to producers and gives them more control over prices," said Paula Albarran, an analyst at Portuguese broker Espirito Santo in Madrid.

Mining stocks also gained, with BHP Billiton and Anglo American each up about 2 per cent as Morgan Stanley raised its price target on a number of stocks in the sector.

Investors seemed to shrug off the euro’s rise to yet another record high at US$1.3247, even though some economists warned that a strong single currency may smother Europe’s frail economic recovery.

"The renewed strength of the euro is probably the most immediate risk to the euro area economy, weakening exports even further," said economist David Owen at Dresdner Kleinwort Wasserstein, adding that domestic demand remained too weak to offset this trend.

Oil prices, up in four of the past five sessions, also seemed to feed gains in oil stocks rather than stoking worries over the impact of high energy costs on consumption and corporate profits. Shares in BP, Royal Dutch/Shell and Total gained between 1.5 and 2.8 per cent.

French motorway operator Autoroutes Paris Rhin Rhne gained 5.4 per cent on its market debut in Paris.

• ASIA: Most Asian stock markets declined yesterday following recent gains, but Tokyo shares continued a rebound as investors hunted for bargain technology and steel issues. Japan’s Nikkei Stock Average of 225 issues rose 28.01 points, or 0.26 per cent, to 10,900.34.

Semiconductor testing device maker Advantest and hi-techs Kyocera and Canon advanced, as did steelmakers Nippon Steel and Kobe Steel.

A weak dollar hurts Japan’s economy by making Japanese exports to the US more expensive and erodes exporters’ overseas earnings when they are converted back to yen.

In Hong Kong, shares fell for a second session, with losses led by banking giant HSBC Holdings and property blue-chips.

The Hang Seng index shed 70.41 points, or 0.5 per cent, to end at 13,926.61. On Wednesday, the Hang Seng fell 26.27 points. Turnover at HK21bn (1.45bn) was well below Wednesday’s hefty HK26.2bn

Bryan Yip, an investment analyst at Standard Life Investments, said he was still positive on the market, particularly property stocks, which, while no longer cheap, still had value.

"And also the liquidity is still around. Versus other asset classes, the Hong Kong market still has some value," he said.

Strong liquidity, driven in part by the weak US dollar, has been helping to limit losses. As the local currency is pegged to the US unit, Hong Kong stocks look relatively cheap versus global peers when the greenback weakens.

Investors were also likely to take profits ahead of a string of upcoming initial public offerings. Air China has brought forward its US$1.1bn IPO by one day to avoid clashing with the $3bn (1.6bn) listing of a Hong Kong property trust that is expected to draw massive investor demand.

Among the gainers, China Unicom was the top Hang Seng performer, up 3.42 per cent to HK6.05 after the South China Morning Post reported it has been given the green light by Beijing to buy up to 49 per cent of Macau’s leading telecommunications company.

China Unicom, the country’s second largest mobile carrier, is expected to start negotiations soon with Companhia de Telecomunicacoes de Macau, and may approach CTM’s biggest shareholder, Cable & Wireless.