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Speculation that the planned merger between French utilities Gaz de France and Suez could get the go-ahead within days eased some of the pain in Europe’s equity markets Wednesday.
GdF shares rose as reports suggested the French government could soon make official the €90bn merger that has been 16 months in the making.
Earlier in the month, Francois Fillon, prime minister, said a decision would be made in late June or early July.
“We expect the new government to announce its intentions over the next weeks, to support a merger as a defensive move to keep Suez independent,” said Per Lekander at UBS.
Although Christine Lagarde, finance minister, said yesterday that no decision had yet been taken and that there was no timetable for the merger, GdF climbed 3.7 per cent to €37.01, while Suez shares were 1 per cent higher at €41.72.
Iberdrola, the Spanish power utility, fell 1 per cent to €40.81 after it announced it was to issue 85m new shares – about 7.3 per cent of total share capital – worth €3.5bn at Tuesday’s closing price.
The FTSE Eurofirst 300 fell 0.5 per cent to 1,579.54 as weakness in the banking sector persisted.
Dresdner Kleiwort, cutting its stance on the sector from “neutral” to “overweight”, said the assumption of high, stable profitability for European banks was about to be tested.
Strategist Philip Isherwood said: “Things are no longer quiet on the credit front and central bankers have the bit between their teeth. Either growth slows or rates rise – either way the banks face the consequences.”
This was illustrated by the UK’s Northern Rock, which yesterday cut its 2007 profit forecasts because recent rate increases had led to rising funding costs.
Anglo Irish Bank fell 4 per cent to €14.88, while rivals Allied Irish Banks and Bank of Ireland fell 1.9 per cent to €20.30 and 3.2 per cent to €14.80 respectively, on fears that slowing domestic growth would hit profits.
None of the 52 stocks in the Eurofirst 300’s banking index ended higher. After recent speculative gains on takeover rumour, Portugal’s Millennium BCP gave back 4.7 per cent to €4.02, while Deutsche Postbank fell 2.4 per cent to €61.56.
ProSiebenSat.1, the German broadcaster, was up 4.1 per cent to €29.50 after it announced it had bought rival SBS Broadcasting for €3.3bn.
The deal, fostered by private equity groups Kohlberg Kravis Roberts and Permira, the majority owners of both companies, aimed to reduce ProSieben’s dependency on its domestic advertising market.
Paper manufacturers were weaker after Credit Suisse downgraded the sector due to falling newsprint prices.
Analyst Lars Kjellberg said: “European producers are losing market share to imports in the home market and exports are falling.”
Sweden’s Holmen fell 1 per cent to SKr289.50 as its price target was cut from SKr290 to SKr270. Stora Enso of Finland was cut from €14.20 to €14 and domestic rival UPM-Kymmene’s target price was reduced from €24 to €23.70. Their shares fell 1 per cent to €14.06 and 1.5 per cent to €18.22 respectively. Norske Skog, whose target price was cut from NKr90 to NKr81, fell 1 per cent to NKr85.40.
Sacyr Vallehermoso, the Spanish builder, fell 2.7 per cent to €35.12 after a French regulatory ruling on Tuesday, that it must make a new bid for French rival Eiffage.
Sacyr, which has built up a stake of nearly a third of Eiffage shares, said it would appeal the decision. Eiffage shares rose 0.2 per cent to €105.20.