UK insurers boost eurostocks; Ericsson slides

www.forbes.com Reuters, 02.03.03, 4:47 AM ET

LONDON, Feb 3 (Reuters) - European blue chips sprinted higher on Monday morning, with UK insurers such as Aviva <AV.L> and Prudential <PRU.L> leading the charge after news the UK's financial watchdog will consider easing solvency rules. Ericsson <ERICb.ST>, the world largest mobile networks maker, dropped sharply after reporting a wider-than-expected fourth-quarter loss and issuing a gloomy outlook. Investors also picked through results from Europe's biggest biotech, Serono <SEOZ.VX>. The stock was 0.75 percent higher after the Swiss group gave an upbeat forecast. "Wall Street's gains and the dollar's small recovery over the weekend should help stock markets," said Gert de Mesure, head of equity strategy at Delta Lloyd Securities in Antwerp. The dollar <EUR=> hit a one-and-a-half week high against the euro. At 0934 GMT, the FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was 1.51 percent firmer at 809 points while the narrower DJ Euro Stoxx 50 index <.STOXX50E> was 0.99 percent stronger at 2,270 points. The Eurotop 300 <.FTEU3> benchmark, coming on the back of three straight years of losses, ended January more than seven percent down -- its worst start to the year since the index's records begin in 1986. Some strategists were sceptical that Monday's rebound will continue given worries over a possible war in Iraq and a fragile macro-economic background. "Military action looks inevitable now within the next six to eight weeks. This means that stocks will remain at an impasse until then, especially while there are precious few signs of any real economic recovery anywhere in the United States or Europe," said David Brown, chief European economist at Bear Stearns. U.S. stock futures were higher, boding well for Wall Street's open. In New York the Dow Jones industrial average <.DJI> closed up 1.4 percent on Friday and the tech-laden Nasdaq Composite <.IXIC> ended 0.11 percent lower. The FTSE 100 <.FTSE> index of British shares was a standout gainer amongst national bourses, up 2.5 percent. "The UK equity market has been a conspicuous underperformer year to date. Aside from Venezuela and Indonesia, it is the worst performer among the 48 countries within the FTSE world index," said Ian Scott, European strategist at Lehman Brothers. "The common factor is a sustained attempt by UK institutional investors to reduce their exposure to equities ....however it does seem as if this process is much closer to the end than the beginning." Insurers were leading the way in the UK after Britain's finance watchdog said on Friday it would consider granting waivers to life insurers to prevent them having to sell equities over fears they may risk breaching solvency margins amid tumbling global stock markets. Royal & Sun <RSA.L> rose 8.3 percent, Aviva <AV.L> gained 7.9 percent, Prudential <PRU.L> jumped 7.2 percent, Britannic <BRT.L> was up 7.6 percent and Friends Provident <FP.L> gained 6.2 percent.

CHEMICAL REACTION Celanese <CZZG.DE> was 11.5 percent firmer at 20.30 euros, reacting to a Financial Times Deutschland report saying a financial investor plans to buy the German chemicals maker, offering 27 euros per each Celanese share. "Financial buyers have been very active in the sector during the past three to five years as chemical stocks are good for cash generation and restructuring opportunities," said one chemicals analyst in London. France's Rhodia <RHA.PA>, which has long been viewed as a potential bid target in the chemicals sector was 4.3 percent firmer. Merger and acquisition speculation also stirred up Trinity Mirror <TNI.L>, one of Britain's largest regional newspaper publishers. Sources said the group has discussed a 1.3 billion pound takeover approach with two venture capital firms. Trinity Mirror rose 6.6 percent.