CNN: Eurostocks snap back as Shell rises: “oil stocks rose on talk of a takeover of Shell” (ShellNews.net)
Oil stocks lifted markets, but traders remained cautious, saying thin volume exaggerated rally.
August 16, 2004
LONDON (Reuters) - European shares rebounded from fresh 2004 lows set Monday to close higher, as heavily weighted oil stocks rose on talk of a takeover of Shell, and German reinsurance firm Allianz gained 2.1 percent on strong results.
A rally in U.S. shares also helped the market mood.
The FTSE Eurotop 300 index of pan-European blue chips closed up 1.0 percent at 950.35 points, bouncing from a new 2004 low of 934.72 struck in the session. The index ended near levels last seen about a week ago.
"We don't think this is the start of a rally. People will be fairly cautious, unless we see a big retreat in oil prices," said a sales trader at a London brokerage.
Traders said thin volumes exaggerated the broader market's rise, and they did not expect big gains unless crude oil prices were to drop significantly from near-record levels.
Affected by the summer holiday season, volume was a paltry 1.6 billion, much lower than the daily average.
"From a valuation perspective, we think a pro-cyclical stance is warranted," said Bernd Meyer, European strategist at Deutsche Bank in Frankfurt.
"We are overweight on sectors particularly more exposed to global growth," said Meyer, who fancies stocks in the basic resources, industrials and capital-goods sectors.
The narrower DJ Euro Stoxx 50 index rose just under 1 percent to 2,604.75 points.
Around Europe, London's FTSE 100 rallied 1.1 percent, while Frankfurt's DAX rose 1.4 percent. Paris' CAC-40 gained 0.9 percent, and Zurich's SMI was up 0.8 percent.
"The fundamentals are all in place for the markets. The trigger can just be the easing of risks, such as the oil price coming down," said Deutsche Bank's Meyer.
Oil prices eased from the latest record high as victory for Venezuelan President Hugo Chavez in a referendum on his rule eased fears that unrest could upset the country's oil exports.
At $46.30 a barrel, U.S. light crude oil was off an early peak of $46.91, a fresh 21-year record. Prices have set new records in all but one of the last 12 trading sessions.
Oil major BP gained 1.3 percent to 493-1/2 pence.
Shell in focus
Takeover talk kept oil stocks in the limelight. Shares in Shell rallied 2.2 percent on a report in Britain's Observer newspaper that executives at the oil major feared a possible takeover bid by France's Total.
Total was unchanged. Both companies refused to comment.
European reinsurers underperformed as investors counted the cost of Hurricane Charley, which wreaked havoc across Florida on Friday.
Analysts said second-half earnings were likely to take a one-time hit from hurricane-related claims, but the fallout would be far less than those following the rampage of Hurricane Andrew in 1992.
Swiss reinsurer Converium led the list of losers, with its shares down 3.6 percent, while Scor was flat.
Allianz helped the sector with a rise of 2.1 percent after its second-quarter profit beat market estimates.
Mining stocks rallied, with London-listed BHP Billiton and Xstrata rising as Morgan Stanley increased its price targets on both stocks. BHP rose 2.9 percent to 523-1/4 pence, while Xstrata was up 3.8 percent to 799 pence.
Elsewhere, Deutsche Bank rose 2.84 percent after JP Morgan upgraded its rating on the bank to "overweight" from "neutral."
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http://money.cnn.com/2004/08/16/news/international/markets_europe.reut/