LONDON - European stocks surged in the backdrop of record crude oil prices and had attained a near three-year high at close on Tuesday. These stocks were also given a major boost as a U.S. government report showed that there was higher productivity in addition to significantly less labor-cost than what had been predicted.
Analysts also felt that these movements could slow down the rate at which the Federal Reserve is increasing the interest rates. These rates looked set for a 10th consecutive increase and it was widely expected that the Federal Reserve would kick them higher by a quarter point to 3.5 percent, "For those who think the Fed is concerned primarily about the pace of inflation, these are excellent numbers. This reduces the need for higher rates and therefore is good for stocks," commented Roger Nightingale, a global strategist for Millennium Global Investments in London.
Record oil prices also proved to be a blessing for Royal Dutch Shell Plc and BHP Billiton whose shares surged on the belief that the crude oil prices as well as that of metals would only climb in future. Shares of Suez and Electrabel also posted significant gains after Suez offered to buyout shares that it does not already own in Electrabel.
A $13.9 billion buyout offer has reportedly been launched by Suez. Shares in Suez were up by 7 percent in the backdrop of this news prompting Peter Wirtz, a West LB analyst to say, "At first glance, it seems the price is fair and that the dilution to Suez is marginal." Dominique Candrian, a managing partner at EIC Partners AG, a Swiss money manager agreed, "Suez and Electrabel may become a real strong player. The European power market has further upside potential when you look at energy prices." Shares in Royal Dutch Shell closed 2.1 percent higher at 1833 pence.
Posted
on : Wed, 10 Aug 2005 09:45 GMT | Investments News
By : Salim Patel
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