European stocks up as takeover deals offset worries about drop in German investor sentiment

By Colleen Barry, AP
Tuesday, June 15, 2010

European stocks rise amid corporate deal-making

MILAN — European stocks edged up Tuesday as markets looked past a drop in German investor sentiment to focus on an improvement in corporate activity.

Shares in British Sky Broadcasting jumped nearly 21 percent in London after it rejected a buyout offer from Rupert Murdoch’s News Corp. that values the company at 12 billion pounds ($17.7 billion).

BSkyB said it would consider a sweeter offer, which some analysts expect to be forthcoming.

The optimism over renewed corporate deal-making helped offset weak economic data in Europe.

German investor confidence fell sharply in June on worries about the persistent debt crisis in the 16 countries that share the euro as well as the impact of spending cuts by European governments, according to a survey by the ZEW institute.

The index sank to 28.7 points in June from 45.8 in May, its lowest level in more than a year.

“June’s drop in German ZEW investor sentiment is another sign that fears about peripheral debt are damaging sentiment towards core euro-zone economies,” said Jennifer McKeown, senior European economist at Capital Economics Ltd.

Despite the news, coming on the heels of Moody’s downgrade of Greek debt, European indexes rallied after opening lower. Analysts said much of the impact of the Moody’s downgrade had already been priced in, even if it put the spotlight back on Europe’s peripheral economies.

Britain’s FTSE 100 index of leading shares was up 0.5 percent to 5,229.99; Germany’s DAX rose 0.5 percent to 6,158. France’s CAC-40 was up 0.8 percent to 3,608.31.

On Wall Street, Dow futures were up 0.1 percent to 10,210 while the Standard and Poor’s 500 futures gained 0.1 percent to 1,090.50.

Oil prices hovered above $75 a barrel as traders eyed demand for crude, while key indexes in Asia posted either minuscule gains or losses after an indecisive day of trading.

Key indexes in Japan and Hong Kong rose tepidly. The dollar weakened against the yen and the euro slipped against the greenback. The Nikkei 225 stock average was up 0.1 percent, or 8.04 points, to close at 9,887.89. Hong Kong’s Hang Seng added 0.1 percent to 20,062.15.

Elsewhere, benchmarks in Australia, Thailand and South Korea were down. Financial markets in mainland China were closed for a holiday.

In New York on Monday, the Dow Jones industrial average erased early gains to end down 0.2 percent at 10,190.89. The S&P 500 index fell 0.2 percent to 1,089.63, while the Nasdaq composite index rose less than 0.1 percent 2,243.96. Stocks began higher following encouraging industrial production data from Europe. But that wasn’t enough to overcome ongoing fears about the continent’s problems, especially after Moody’s lowered its rating on Greece’s debt to “junk” status.

The fallout in Asia was mild, however, with a few benchmarks showing a small amount of buoyancy ahead of U.S. industrial production numbers due Wednesday.

“Overseas markets have regained some of their nerve,” said Howard Gorges, vice chairman of South China Brokerage in Hong Kong. “People will still be wary because of what goes on in Greece or Spain, but there’s been so much adverse news that markets are ignoring quite a lot of it.”

While the euro has risen since hitting a four-year low earlier in June, it has dropped more than 15 percent this year and a strong rebound isn’t expected in the near-term. Analysts also said traders remained a bit on edge, and markets could stay choppy.

“It is a seesaw situation,” said Castor Pang, director of research at Cinda International in Hong Kong. “Most investors are still cautious.”

In currencies, the dollar slipped to 91.37 yen from 91.58 yen late Monday in New York. The euro rose to $1.2254 from $1.2210.

Benchmark crude for July delivery was up 84 cents to $75.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.34 to settle at $75.12 on Monday.


AP writer Pamela Sampson contributed from Bangkok.

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