NEWS / Foreign Debt

Euro marts rally on oil's fall

LONDON: European stocks rose to a one-week high yesterday, bolstered by gains on Wall Street as oil prices dropped sharply after a UN-brokered Middle East truce, with construction and financial shares making headway.

Among the day??™s biggest gainers, Ahold rallied after coming under pressure from two hedge funds to break up the company and sell its US assets, while Schroders clawed back a chunk of its recent losses after a broker upgrade.

The FTSEurofirst 300 index of leading European shares closed 0.9% higher at a week high of 1,343.6, with about half the average daily number of shares traded.

"We??™re looking for a catalyst that will set this market higher, it could be lower oil," said Victor Polak, a portfolio manager at Citigroup??™s wealth advisory unit.

"European valuations sound pretty reasonable. I don??™t think you can argue that markets are overpriced."

Around Europe, the FTSE added 0.9%, while the DAX gained 1.1% and the CAC 40 rose 1.2%.

The Dow Jones industrial average added 1%, while Nasdaq rallied 1.7%.

Some European markets will be closed today for Assumption Day, and although France and Switzerland are open, volumes are likely to be hit by the public holiday.

Heavyweight oil producers managed to shrug off weaker crude, with BP up 0.8% after saying it would keep half its Prudhoe Bay oilfield pumping. France??™s Total gained 0.7%.

Amongst major gainers, Dutch food retailer Ahold added 3% after hedge funds Paulson & Co Inc and Centaurus Capital said they would push for a restructuring of the company which could boost its market value.

Construction stocks strengthened, with Germany??™s Hochtief jumping 5.5% after its Australian business helped push its second-quarter profit higher.

Lower oil prices also helped support airlines, with British Airways up 1.9% after Britain lowered its security alert after police last week said they had thwarted a plot to bomb transatlantic airliners.

Grupo Ferrovial, which has agreed to buy British airport operator BAA, rose 2% along with Germany??™s Lufthansa. Discount airline Ryanair bucked the positive move to slide 1.2%.

Financial stocks were stronger, with Schroders adding 6.5% after Bridgewell Securities raised its recommendation on the stock to "overweight" from "neutral", saying Friday??™s sharp sell-off was overdone.

Elsewhere, Barclays gained 2.1% after Merrill Lynch added the stock to its Europe 1 portfolio list.

Technology stocks added to the positive tone, with Alcatel rising 2.4%, while handset maker Nokia added 2% and Ericsson gained 1.9%.

On the downside, BT lost 0.9% after Cazenove cut the former British telecoms monopoly to in-line from outperform.

The dollar held steady at close to two-week highs against the euro in a quiet start to the week, with investors awaiting key US inflation data tomorrow.

The euro climbed to $1.2740 in late European trading, compared with $1.2726 late on Friday in New York.

The dollar stood at ??116.47 from ??116.26 on Friday.

Investors??™ overriding question is whether US interest rate setters will raise their benchmark rate again after calling a halt last week to a run of 17 consecutive rises to leave the cost of borrowing at 5.25%.

The pound was being traded at $1.8907 from $1.8905 on Friday.

On the London Bullion Market, the price of gold slid to $624.60 per ounce, from $644.50 late on Friday. ??“ Agencies