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Telecoms excite Europe
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January 27, 2000: 1:08 p.m. ET
Frankfurt, Zurich jump more than 2%; London and Paris post gains
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LONDON (CNNfn) - European markets finished firmly higher Thursday, buoyed by a powerful early rally on Wall Street and a scramble for leading telecom stocks after France Telecom revived hopes for its international ambitions by disclosing plans to acquire the troubled Global One communications venture.
Frankfurt and Zurich closed more than 2 percent higher and London advanced 1 percent, but Paris managed only a small gain despite a surge by France Telecom.
The euro dropped to record lows against the U.S. dollar for the second time in three days amid apprehension over the strength of the U.S. economic expansion, now in its ninth year. Data released in the U.S. Thursday showed orders for factory goods in December rising at their most rapid pace in five months. The euro was quoted at just below 99 cents in late trade in London, well off its $1.17 launch level last January.
London's benchmark FTSE 100 closed up 65.4 points, or 1 percent, at 6,441.0, with banking issues making the strongest contribution to the blue chip advance. National Westminster Bank posted sharp gains after hostile suitor Bank of Scotland sweetened its offer, triggering hopes for a high-priced retort from Edinburgh-based rival Royal Bank of Scotland.
In Paris, the leading CAC 40 index ended up three- quarters of a percent at 5,688.35, aided by a surge of more than 5 percent in anchor component France Telecom as investors applauded its decision to buy the rest of the money-losing Global One communications venture for nearly $4 billion. The upside was capped, however, by a big loss in computer consultant Cap Gemini.
The electronically traded Xetra Dax index rose 2.25 percent amid a surge in its most heavily weighted issue, Deutsche Telekom, while the SMI in Zurich gained 2.15 percent to 7,113.4.
The FTSE Eurotop 300, a pan-European index that reflects the broader regional mood, closed up 1.3 percent at 1,530.91. The telecom and computer sub-indexes of the gauge both jumped around 3 percent, more than offsetting losses in food and beverage stocks.
Among smaller markets, the blue-chip MIB-30 index in Milan shot up 1.6 percent to close at 42,735, matched in percentage terms by Madrid, where the leading Ibex-35 gauge finished at 11,206.6 on the back of a more than 5 percent surge in its most valuable company, Telefonica.
Banks dominated the day in London, accounting for 35 points of the overall FTSE 100 advance and ensuring a positive close despite a session that saw losers outstrip decliners by a 3-to-2 margin. The banking gains came after unsolicited bidder Bank of Scotland (BSCT) announced a sweetened bid of 24.3 billion pounds ($40 billion) for National Westminster Bank (NWB), whose shares leapt 3.9 percent to 1,283 pence. The revised bid triggered hopes of a high-priced retort from rival Royal Bank of Scotland (RBOS), whose shares rose 1.9 percent to 1,1,055 pence.
Other financial institutions that laughed all the way to the bank Thursday were Barclays (BARC), which gained 6 percent, HSBC Holdings, which romped up 3.9 percent, and Lloyds (LLOY), adding 4.2 percent.
Financial and healthcare software firm Misys (MSY) soared 11.1 percent after a ratings upgrade and amid expectations of robust business growth ahead. Earlier, the group had posted a six-month profit slightly sky of expectations as Y2K fears kept some clients away from the company's products.
In Paris, France Telecom (PFTE), which accounts for 12.9 percent of the CAC-40 index's total weighting, closed up 5.6 percent at 135 euros after the company agreed late Wednesday to pay $4.4 billion cash and debt to buy control of money-losing global telecom operator Global One from Deutsche Telekom (FDTE) and U.S.-based Sprint (FON). Investors applauded the decision as a sign the French firm is eager to forge ahead with an international expansion strategy that seemed to stall last year, according to Reuters. Telekom shares soared 6.8 percent in Frankfurt to end at 75.5 euros.
Utility and construction group Vivendi (PEX) rose 3.6 percent ahead of a Friday board meeting that's expected to discuss possible partnerships, Vivendi is said to be mulling a possible alliance with Britain's Vodafone AirTouch (VOD) or British Telecommunications (BT-A), having suspended talks with Mannesmann (FMMW)
Computer services provider Cap Gemini (PCAP) skidded almost 11 percent amid recommendation and EPS downgrades sparked by disappointment with the company's bearish outlook this year. Speaking with analysts after its earnings report late Wednesday, Cap Gemini said full-year profit growth is expected to be in the low-double-digit percentage range.
"Analysts were looking for a somewhat higher number," ABN Amro analyst Mathieu Hoen said. He also said the company indicated Cap Gemini's talks with accounting firm Ernst & Young about linking their two consulting businesses will take longer than first thought.
Several brokerages, including J.P. Morgan and Banque Nationale de Paris, cut their earnings estimates Thursday. Hoen, however, has an "undervalued" rating on the stock, and said the dip Thursday offers a buying opportunity. Cap Gemini reported a better-than-expected 42 percent rise in 1999 net earnings on Wednesday.
Food maker Danone (PPBN) dipped 0.6 percent after posting a 12 percent rise in net profit for 1999, noting a strong performance from its drink business. The company is best known as the maker of Evian mineral water.
Frankfurt's Dax was lifted by Deutsche Telekom's sharp advance and a nearly 7 percent leap in shares of software giant SAP [FSE:FSAP3]. The business software publisher enjoyed a round of analysts' earnings upgrades following Monday's upbeat 1999 financial report.
Sports apparel maker Adidas-Salomon (FADS) soared 6 percent after unveiling a growth and efficiency program with a sharper focus on e-commerce. The company said the revamp will result in a 20 percent decline in per-share earnings in 2000, but forecast annual earnings growth of around 15 percent from 2001 and on.
Drug stocks closed firmly in London. Glaxo Wellcome (GLXO) climbed 1.6 percent, while its merger partner SmithKline Beecham (SB-) advanced 2.4 percent. 
--from staff and wire reports
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