Markets
Eurostocks near 8-week highs
Europe's leading shares rose to near-eight week highs in late trade yesterday, as investors awaited possible interest rate cuts and snapped up interest rate-sensitive financial stocks in heavy volume.
Beaten-up insurers like Germany's Allianz and Britain's Aviva led the way, as bargain-hunters delved into one of the year's worst performing sectors.
"In this bear market rally it's only natural that insurers should regain some lost ground," a senior US bank trader said.
Another standout was Europe's biggest lender Deutsche Bank, which saw its shares soar on news of some asset sales that were seen helping its balance sheet.
By 1555 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index was up 0.5 per cent at 923 points and on course for its best close in almost eight weeks.
The benchmark has recovered almost 16 per cent since plumbing five-and-a-half year lows last month.
Rising stocks outpaced fallers by a margin of three-to-two, and the narrower DJ Euro Stoxx 50 index rose 0.93 per cent to 2,616 points.
The DJ Stoxx insurance index easily led the sectoral leaderboard, with a gain of 3.1 per cent, as the likes of Allianz, Munich Re, and Aviva added more than five per cent each.
That took the sector's year-to-date loss to 44 per cent, from almost 60 per cent less than a month ago.
Shares in Deutsche Bank leapt five per cent on news it had sold most of its securities services business to State Street Corp. of the United States for $1.5 billion.
The bank also sold its stake in Germany tyremaker Continental for about $140.5 million.
The cash was seen helping the bank's balance sheet which has come under pressure from the bear market in stocks and dwindling corporate activity among its clients.
Another standout was Vivendi Universal, which saw its shares surge by 8.5 per cent after a source close to Belgacom said the Belgian telecoms operator was in preliminary merger talks with its mobile phone affiliate Cegetel.
That helped fan hopes among traders that Belgacom would either help the debt-ridden media giant seize control of the telecoms unit or push Vodafone to raise its rejected bid for Vivendi's 44-per cent Cegetel stake.
Wall Street was mixed, with a weak dollar, the growing possibility of a war with Iraq, uncertainty over Tuesday's mid-term elections among some of the concerns as investors eyed the Federal Reserve's US interest rate setting meeting today.
The Dow Jones industrial average rose 0.5 per cent while the Nasdaq Composite shed 0.6 per cent.
US interest rate futures assign a 100 per cent probability of a quarter percentage point US rate cut today and an 80 per cent probability of a half point cut by end-year.
Some traders are also hoping the Bank of England and European Central Bank, which meet tomorrow, could follow suit with cuts of their own.
But despite the prospect of more liquidity being drawn to the market and of cheaper funding costs for both consumers and businesses, fund managers remained cautious about the way ahead for stock markets.
"We don't think a Fed cut will change the underlying weak economic picture," said Joerg Kraemer, head of economics and strategy at Invesco Asset Management Deutscheland in Frankfurt, which has a tactically overweight position in equities.
That was demonstrated by the US Institute of Supply Management's non-manufacturing index for October, which although better-than-expected at 53.1 was still down from 53.9 in September.
The tech-studded Nasdaq slipped after US chip equipment maker Applied Materials said it will slash about 11 per cent of its work force to combat a slump in microchip demand.
Applied's statement sent European chip-related shares sliding, with recent high-flying Dutch group ASML down 1.3 per cent.
The technology sector was also anxiously awaiting quarterly earnings from bellwether Cisco Systems today, amid fears that the group may offer a lacklustre outlook.
Meanwhile, retailers were slammed as several UK constituents fell after leader Marks & Spencer sank 7.0 percent on disappointment over the performance of its core UK retail business despite strong first-half results.
Despite beating market expectations with second-quarter operating profits that tripled, shares in British Airways sank 8.3 per cent, with investors worried about the uncertain outlook.