Telecoms, Technology Boost European Stocks
European stocks soared to record highs Thursday as investors poured into telecoms and technology while U.S. players tucked into Thanksgiving turkey.
Meanwhile, the euro remained depressed, with traders discussing whether, if not when, the $1.00 level would be reached.
In Tokyo stocks pulled back modestly, with the Nikkei-225 index easing 0.9% to 18,721.78.
The Dow Jones Euro Stoxx 50 index of Eurozone blue chips surged 2.5% to a new high of 4,345.02 before closing at 4,343.22.
Trade was thinner than usual with Thanksgiving keeping U.S. markets closed, but a host of corporate activity laid the ground for big moves in Europe.
“It’s a phenomenal day. It’s interesting that Europe’s managed to do it without the help of the U.S.,” said Ben Funnell, European strategist at Morgan Stanley Dean Witter. “We made our own mind up for once.”
The main French index jumped 3.2%, while German shares gained 2.5% and the Italian market rose 1.8%.
Vodafone AirTouch saw some of the heaviest trade, rising more than 7% as concerns eased about hurdles it may have to jump to complete its all-share bid for Germany’s Mannesmann. Mannesmann soared 7.5%.
European technology stocks got a boost, egged on by Wednesday’s surge in U.S. tech stocks. Also, Italian software house Finmatica booked an unprecedented 700% gain in its market debut, making Milan center-stage for Euro-Internet mania.
Among other big gainers, Britain’s National Westminster Bank jumped 9.6% after the British government cleared Bank of Scotland’s bid for the larger bank, ruling that it did not raise competition concerns.
French television group Canal Plus surged more than 18% after being boosted by analysts, who were impressed with the strong debut of U.S. interactive television software company OpenTV.
German construction group Philipp Holzmann surged 33% on Chancellor Gerhard Schroeder’s plans to rescue it from insolvency, which also helped lift market sentiment.
But the rescue of Holzmann set a different tone in currency markets, leaving the euro just above its 1999 low of $1.014.
“Anything which smacks of [government] interventionism is read as a market negative for the euro,” said David Brown, chief economist at Bear Stearns in London. That’s because traders believe such interventionism will delay structural reforms in Europe and keep economic growth subdued.
Also, a perception that the European Central Bank was following a “benign neglect” policy on the euro is keeping pressure on the currency’s value.
Often, stock markets react badly to a falling currency. But the European markets are being driven by some of the same factors lifting U.S. stocks: strong cash inflows into mutual funds, and a mania for technology and telecom issues.
