European Shares Advance on Rio Tinto bid speculation (MarketWatch) (01-02-2008)

LONDON (MarketWatch) - European shares started the month rising sharply as the speculation of a deal involving Rio Tinto boosted sentiment ahead of some key U.S. jobs data.

The pan-European Dow Jones Stoxx 600 index jumped 1.1% to 325.83, led higher by strong gains from Rio Tinto, which rose by 10.6% following the news that Chinalco and Alcoa said Friday that they've acquired a 12% stake in the miner.

Although Chinalco and Alcoa said they do not currently intend to make an offer for Rio Tinto, but reserve the right to make an offer under certain circumstances.

The news meant that shares in BHP Billiton got a lift as well, recently up 7.7%. BHP Billiton approached Rio Tinto with a $114 billion takeover proposal in late 2007, but Rio claims the proposal undervalues it.

Other miners on the rise included Anglo American, up 5.7% and Vedanta Resources, up 3.7%.

The U.K. FTSE 100 index surged 1.5% to 5,967.60, the German DAX 30 index climbed 1.3% to 6,940.33 and the French CAC-40 index jumped 1.6% to 4,949.23.

Shares in French bank Societe Générale rose 2.4% after a report in Les Echos newspaper that Credit Agricole has hired Lazard and Calyon -- its own investment banking arm -- to advise it on a possible approach for Societe Générale. Credit Agricole shares advanced 0.5%, underperforming the broader market.

Also, on Thursday BNP Paribas said it was looking at SocGen because other European banks were also examining a bid. Shares inched up 0.3%.

Shares in Ericsson also underperformed the broader market, up just 0.1% after its net profit plunged 42% to 5.64 billion kroner ($886.7 million) in the three months ended Dec. 31. The profit decline met analyst expectations.

British Airways shares fell 1.5% in London, after rising in recent weeks. The airline said that its profit after tax rose 22.4% to 623 million pounds ($1.24 billion) in the nine months to Dec. 31, after revenue increased 0.9% to 6.6 billion pounds.

Meanwhile, shares in German conglomerate ThyssenKrupp climbed 3.5% after it said that it will buy back up to 15.8 million shares, or 3% of its share capital.

ThyssenKrupp said that its current share price does not reflect the fair value of the company.

Source: MarketWatch