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Wall Street Journal features Stephen Pope & Spotlight Ideas

Tuesday May 31st 2011

Oil Firms, Greek VBanks Lead Euripe; Nokia sinks

http://online.wsj.com/article/BT-CO-20110531-711039.html


LONDON (Dow Jones)--European stock markets closed sharply higher Tuesday on hopes that Greece will be able to avoid a restructuring of its debt, with Greek banks including Eurobank Ergasias surging 10%, while oil stocks like Total SA gained as the euro rose and the dollar fell.

On the downside, shares of mobile giant Nokia Corp. sank nearly 18%, making it one of the biggest decliners on the Stoxx Europe 600 index after a profit warning.

The Stoxx 600 closed up 0.8% to 281.06. U.S. markets, returning from Monday's Memorial Day holiday, also moved higher in early trading as Greek optimism filtered through.

The Wall Street Journal reported that Germany may abandon a push to reschedule Greek debt early, which would allow for fresh EU aid for Greece.

The euro rallied on the news and was recently up about 0.4% against the dollar.

The Greece ASE Composite index soared 5.6%, with shares of Eurobank Ergasias and National Bank of Greece up around 11% and Alpha Bank AE up 8.6%.

"Greece and its ability to find yet another accommodation with its many creditors will continue to set the tone for Europe," said Stephen Pope, managing partner of Spotlight Ideas.

"Naturally any suggestion that obligations will be honored, even if later as against sooner, will deliver a benefit for the affected parties, namely the euro and exposed banks." But Pope added that he cannot believe this "quick fix" will be the last. "We'll have this same conversation in May 2012, if not before."

German and French banks have some of the largest holdings in Greek bonds, while Credit Agricole SA and Societe Generale SA also each have Greek subsidiaries.

Shares of Societe Generale jumped 2.5%, and Credit Agricole rose 1.8%, both heavyweights on the French CAC 40 index, which closed up 1.6% to 4,006.94.

One bank that bucked the trend was Bank of Ireland, which dropped nearly 28% in Dublin after the lender announced a "liability management exercise" that would result in some holders of junior debt facing losses of up to 90%.

In Germany, shares of Deutsche Bank AG rose 2%. Chemicals gains also boosted the German DAX 30 index, which closed up 1.9% at 7,293.69.

Shares of BASF SE jumped 3.8%, and K+S AG rose as the chemicals sector in Europe had a strong showing overall on Tuesday.

Shares of Arkema SA rose 4.2%, Linde AG rose 1.8% and K+S AG gained 2.7%.

Peripheral markets outside of Greece also mostly rose.

Spain's IBEX 35 jumped 2.1%, led by a 4% rise by Banco Santander SA and a 3.2% lift for BBVA SA.

Greek optimism rallied the euro against the dollar, which in turn drove up the price of crude oil.

A fall in the dollar typically encourages gains in crude prices, as it makes the commodity cheaper for buyers who hold other currencies.

Heavyweight oil stocks rose on those higher crude prices. Total SA and Royal Dutch Shell PLC were up 1.5% and 2.7% respectively. BP PLC rose 1.9%.

Among car makers, shares of Volkswagen AG slipped 0.3%, after the group reportedly outlined a formal bid for truck maker MAN SE.

Shares of MAN rose 0.3%, while rival truck maker Volvo AB rose 1%.

In Paris, shares of Renault SA rose 1.6%.

On Monday, the car maker appointed Carlos Tavares as chief operating officer.

Shares of Peugeot SA rose 1.1%.

In London, the FTSE 100 index returned from Monday's bank holiday to close up 0.9% at 5,989.99

Aside from gains for heavyweights BP and Royal Dutch Shell, Standard Chartered PLC gained 1.4%.

Standard Chartered was upgraded to buy from neutral at Nomura, which said the emerging-markets-focused bank is well-positioned for long-term growth.

Also gaining in London, shares of plumbing-supplies business Wolseley PLC soared 3.4% on media reports that the group will sell three units: Build Center, Electrics Center and Encon. It's also due to third-quarter results on Wednesday. A spokesperson from Wolseley could not be reached for comment.

Slumping shares of Nokia - off 18% - stood out in an otherwise positive Europe Monday.

The Finnish telecommunications group cut its second-quarter outlook for devices and services business, citing "multiple factors negatively impacting" business.

The firm said it expects its second-quarter net sales in that division to be substantially below a previously expected range of EUR6.1 billion to EUR6.6 billion, or $8.78 billion to $9.50 billion, based on lower-than-expected prices and volumes for cell phones.

It said its margin on mobile devices will be below a previously expected 6% to 9%.

 

-By Barbara Kollmeyer

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