Europe overtakes the US

A BRIGHT confluence of factors has driven Europe beyond the United States in stock market value for the first time since the First World War.

The strong growth of more liberalised eastern European markets like Russia (liberalisation is relative, of course) is one factor.

Then there is the increasing stampede of flotations to western Europe, particularly the City of London, because of the ossifying obligations on directors imposed by Sarbanes/Oxley in the wake of Enron and WorldCom.

Hide Ad
Hide Ad

Take in stock market outperformance in Europe and the rise of the euro against the dollar since it was launched in January 1999 and you see the strong wind that has been in Europe's sails.

The result is that Europe's two dozen stock markets have seen their market capitalisation rise to $15,720 billion (7,950bn) currently, compared with the $15,640bn value of the US.

The rise in value of Russia's huge energy industry has helped, as has the impact of the enlargement of the European Union on stock market transparency in many European countries.

There has also been the growing credibility of Euronext, the market comprising Paris, Amsterdam, Brussels and Lisbon that was launched in 2000.

But the role of the City of London has also been key in Europe overhauling the US capital markets. The value of the London Stock Exchange's international business in equities, bonds and forex exceeds the rest of the European Union combined.

There are about 300 foreign bank branches in the City and well over 200 foreign law firms with London offices - a key infrastructure for healthy stock markets.

It is difficult to see how the US will regain its No 1 position.The hangover from its stock market scandals has not faded.

From its regulators like the Securities & Exchange Commission to within the Washington political beltway and down to Joe Public there seems little appetite for a more lighthanded regulatory touch - and that will continue to constrain the new flotations pipeline by which the US could hope to add value to its stock markets.

Hide Ad
Hide Ad

Meanwhile, US companies are no more generally profitable than their European counterparts so that avenue to outstripping Europe again looks unpromising.

E.ON has left the Spanish utility dance with only half the girl. But the carve-up of Endessa by the German energy giant and its Italian rival Enel is putting a becoming bloom in Scottish & Southern Energy's cheeks.

It could mean E.ON will look around for further acquisitions, and SSE looks one of the most digestible on the European block at present.

Remember, it was E.ON that kicked off the whole takeover ballgame that eventually led to ScottishPower being taken over by Iberdrola of Spain, and it must be envious of the revenue and costcutting synergies Iberdrola will make in Scotland.

SSE's shares have had an astonishing run over the past three years, trading under seven quid in 2004, less than half of where they are now.

That has been due to an impressive trading performance, avoiding the American adventurism that laid ScottishPower low, and an increasing element of bid froth.

The stock put on a further 24p to 1,582p yesterday, taking it to record highs. Even at these heady levels, the prospect of E.ON or another European rival making a bid at a decent, if diminishing, premium remains high. Shares still worth a punt.

PUBLISHER Bloomsbury's shares changed their shape at will last December, very much like the company's talismanic character Harry Potter.

Hide Ad
Hide Ad

Unfortunately the new shape was a crumpled heap, the stock losing a third of its value on a profits warning.

Bloomsbury yesterday duly delivered the slump in 2006 profits down to 5 million from 20 million in the previous year.

Its problems include no major new Harry Potter release last year.

As with newspapers, book publishers like Bloomsbury are trying to offset these pressures by increasing focus on digital products and stepped-up acquisition programmes.

Bloomsbury has 24m in the kitty for the strategy, but the jury is still out on whether digital for the publishing industry is a saviour or chimera, and acquisitions are always risky. Sell.

Severfield-Rowen: Record profits, healthy dividend

STRUCTURAL steel group Severfield-Rowen rallied after reporting a record full-year profit up 54 per cent on 2005, and announced future prospects were considered as "excellent".

Pre-tax profits for the 12 months to 31 December leapt to a record 30.3 million from 19.7m in 2005 on revenue almost 25 per cent higher at 295.1m.

Chairman Peter Levine said: "Our markets remain robust and demand for structural steelwork projects, particularly larger projects, continues to be significant."

Hide Ad
Hide Ad

The current year has started with trading ahead of the firm's expectations, he added, leaving the company confident of further success in 2007.

Managing director and one of the company's founders John Severs intends to retire from the board this year.

Tom Haughey will be appointed as chief executive and Peter Emerson will become chief operations officer following Severs' departure.

A final dividend of 37p per share is up on the 24.5p a year ago and takes the full year payout to 57p, 54.1 per cent more than the 37p paid in 2005.

The company's share price closed up 105p - or 5.5 per cent - at 2,025p, valuing it at some 413m.

British Energy talks nearing end

BRITISH Energy, the Scottish-based nuclear power generator, could be set to restart its Hinkley Point power plant as talks continue with the nuclear industry watchdog, which should give its shares a boost.

British Energy must convince the HSE's Nuclear Installations Inspectorate that Hinkley Point, which has been shut for about six months for boiler repairs, can run safely at 70 per cent of capacity until further work planned for next year.

The company had hoped to get at least one of the two affected reactors at the plant in south-west England going by the end of March. An HSE spokesman declined to say how much longer the talks would continue. The firm's Hunterston B power station in Scotland has also been shut since October, but BE has already said that plant would not restart until April.

SCOTS STOCKS

Hide Ad
Hide Ad

SHARES in Scottish & Newcastle increased by 16p, or 2.7 per cent, to 605.5p yesterday after broker JP Morgan said the UK's largest brewer was more likely to get any takeover bid from private-equity suitors than a competing beer-maker.

The recovery followed Monday's 2 per cent fall when traders took profits.

Meanwhile, Scottish & Southern Energy, the UK's third-largest gas and electricity supplier, rose by nearly 2 per cent, up 24p to 1,582p, after it was seen as the sector's most likely bid target after Scottish Power's takeover last year.

Royal Bank of Scotland was on the fallers' board after the company announced plans to sell its securities business to French bank BNP Paribas for an undisclosed fee. Investors reacted poorly to the deal and shares fell 8p to 1,980p.

Peer HBOS also lost ground yesterday, off a penny at 1,043p.

Among the smaller to mid-caps, sausage-skin maker Devro saw a 2.6 per cent rise in its share price by 3.5p to 136.75p, while British Polythene eased up by 5.5p to 486p.

However, Dawson International lost more than 10 per cent of its value, with its shares down 0.5p to 4.25p, while Ramco Energy shed 1.5p to 17.5p.

Related topics: