European Stocks Expected to Gain, Led by Manufacturers as Economies Expand
(Repeats story originally published Friday.
Paris, Feb. 6 (Bloomberg) -- European stocks are likely to
gain in coming days, led by Solvay SA, Algroup and other
manufacturing companies, on optimism economic activity is picking
up. Nokia Oyj and other telecommunication companies may decline
on concern they've risen too far, too fast.
''People will probably start to get onto the cyclical stocks
bandwagon,'' said John Dreyer, who helps manage about $5.4
billion at fund manager Fimagest in Paris. ''Our economist is
saying 'hey guys, I've been too prudent.' '' He recently bought
U.S. bank shares.
The Bloomberg Europe 500 Index slipped 0.65 percent in the
past week, led by Nokia Oyj and other telephone-equipment makers.
Nokia had surged 145 percent from its 52-week low of Oct. 8,
compared with a 36 percent gain by the Europe 500. Nokia fell 8.9
percent for the week, closing at 117.1 euros.
The Bloomberg Europe Construction and Engineering and the
Building Materials indexes gained the most in the week, up 3.2
percent and 4.8 percent respectively.
Fueling optimism for corporate profits, the European
Commission said Thursday that consumer confidence in the 11
countries in Europe's single currency region rose in January,
boosted by a record high in French consumer confidence.
''Telecommunications, drugs, and utilities, which have done
so well the past six months, are now excessively valued,'' said
Olivier Lefevre, who helps manage about $100 million at Monte
Paschi Banque in Paris. ''People are coming back to cyclicals --
the oils and chemicals -- that have been dumped over the past six
months.'' He cited Saint-Gobain SA, a glass and building material
maker, and Schneider SA, an electrical component maker. He
recently sold shares in U.K. drugmaker Zeneca Plc.
Saint-Gobain gained 11 percent in the week, closing at 136.9
euros, after dropping 5.5 percent since the beginning of last
year. Schneider, up 2.5 percent since then, advanced 10.5 percent
in the week to close at 56.45 euros. Zeneca fell 22 pence to
2,630.
Silver Linings
Signs some of the world's knottiest economic problems are
being unraveled may also boost manufacturers, which rely on
global economic activity.
Brazil's currency, the real, gained 13 percent this week on
hopes the International Monetary Fund will speed the release of
aid to restore confidence in the country's ability to pay its
debts. And in Japan, the Economic Planning Agency said that while
the economy remains in a ''very severe situation,'' consumers are
starting to purchase some items. The government expects the
economy to grow 0.5 percent in the year starting April 1, after
contracting 2.2 percent this year and a revised 0.4 percent last
year.
''Brazil looks like it's going to come back strongly,''
Dreyer said. ''And Japan looks like it's recovering.''
Chemistry Report
Solvay SA may be among the gainers. Belgium's biggest drugs
and chemicals maker is slated to release preliminary full-year
earnings Feb. 11. Analysts polled by IBES International expect it
to report earnings of 4.21 euros a share, up from 3.9 euros last
year. The shares gained 3.6 percent in the week, to close at
60.95 euros, as rival Imperial Chemical Industries Plc said
fourth-quarter net income fell a smaller-than-expected 43
percent.
Clariant AG, the world's largest specialty chemicals maker,
is set to report 1998 earnings Feb. 11 before the market opens.
Analysts polled by IBES expect earnings per share of 34.7 Swiss
francs, up from 21.9 francs a year earlier. The shares rose 2
percent on the week to 722 Swiss francs.
Algroup, a Swiss diversified manufacturer which is being
bought by German utility Viag AG, may also be active. Both
companies are due to report earnings on Feb. 12. Viag said it
wants to buy out the minority shareholders in Algroup's traded
chemical and packaging units to gain full management control.
Algroup shares fell 1 percent in the week to close at 1,570 Swiss
francs. Viag fell 3.1 percent to 463 euros.
Royal Dutch/Shell group reports earnings on Feb. 11. The
world's biggest publicly traded oil company is expected to say
fourth-quarter profit slipped as much as 20 percent from a year
earlier. Still, shares in Dutch arm Royal Dutch Petroleum Co.
surged 12 percent in the week to close at 39.65 euros. Royal
Dutch/Shell was raised to ''buy'' from ''hold'' at brokerages
Credit Suisse First Boston and Williams de Broe Thursday.
Among other companies reporting earnings are Portuguese bank
Banco Espirito Santo e Comercial de Lisboa SA on Feb. 9 after
trading closes, world No. 2 paper maker Stora Enso Oyj on Feb.
10, Dutch office products company Buhrmann NV on Feb. 10,
Norwegian bank Den Norske Bank ASA, on Feb. 11, Europe's No. 1
semiconductor maker Royal Philips Electronics NV on Feb. 11 and
Danish bank Unidanmark A/S on Feb. 11.
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