Posted on Monday, 4th January 2010 by admin
Deals, Bernanke and China data drive leading shares higher.
LONDON — European traders marked the start of 2010 with plenty of buying, sending the regions main indexes higher in midday trading on Monday, and in spite of a mixed close in Asia.
The Dow Jones Eurostoxx index of 50 leading shares was up 0.9% at 2992.99 points, with Londons FTSE 100 up 0.7%, the Paris Cac-40 gaining 1.1% and Frankfurts DAX up 0.9%.
Markets were led higher by a relatively good read on Chinese manufacturing data along with comments from U.S. Federal Reserve Chairman Ben Bernanke, who hinted at a speech on Sunday of no new rate hikes in the near future and called for stricter regulation of the financial system. Bernanke also shot back against criticism that the Fed had inadvertently fuelled the U.S. housing bubble by keeping interest rates too low for too long. (See “Never Say Credit Again.”)
Also helping European stocks was a wash of deal activity: The Swiss drug maker Novartis ( NVS – news – people ) said Monday that it had reached a deal to buy 52% of the eye-care firm Alcon ( ACL – news – people ) from Nestle ( NSRGY – news – people ) and other minority shareholders for some $28.1 billion, or $180 a share.
Novartis is also offering 2.8 of its own shares for each remaining, publicly-held Alcon share, worth a total of $11.2 billion, the company said. The deal, in which Alcon would become a 77% majority-owned Novartis subsidiary by April 2008, will help Novartis expand into eye surgery. Novartis new eye-care division will include Alcon, CIBA Vision and selected ophthalmic medicines after the merger. Shares of Novartis slid 0.8% in Zurich.
Elsewhere on the M&A front, shares of Cadbury ( CBY – news – people ) ticked up by 0.4% after reports in the Financial Times and Times of London said that hostile suitor Kraft Foods ( KFT – news – people ) would sweeten its 10 billion pound ($16.2 billion) bid for the chocolate maker within the next two weeks.
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Krafts current cash-and-stock offer represents a 61 pence (99 cents) discount to Cadburys closing price at the end of 2009. The company had set a deadline of Tuesday Jan. 5 for that bid, but if it does not make a move before Jan. 19, it may only raise its bid if another suitor–Hershey ( HSY – news – people ) is seen as the most likely alternative–emerges with a higher offer.
Cadbury’s shares were trading at 801.5 pence on Monday, above Kraft’s offer price of around 737 pence per share, suggesting investors were also holding out for a higher bid.
Shares of the French oil giant Total ( TOT – news – people ) climbed 1.7% after it announced its move into the U.S. shale gas business with a $2.25 joint venture with Chesapeake Energy ( CHK – news – people ). As part of the deal, Total will pay $800 million cash for Chesapeakes upstream Barnett Shale assets; it’ll pay an additional $1.45 billion by funding 60% of Chesapeakes share of drilling and completion expenditures until late 2012.
Other shares on the move included British banks, with Royal Bank of Scotland ( RBS – news – people ) and Lloyds Banking Group ( LYG – news – people ) moving higher on reports of asset purchases and of a Northern Rock sale to potential bidders Virgin Money and National Australia Bank ( NAB – news – people ).
The British Treasury confirmed Monday that state-owned lender Northern Rock had been officially split into a good and bad bank, with the latter no longer selling new mortgages and now officially named Northern Rock (Asset Management) plc.
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