Europe closes at 17-month high
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PARIS, France (Reuters) -- European shares ended firmer on Monday, closing in on a 17-month high, as Wanadoo surged on talk of a buy-out by France Telecom and hopes of solid results buoyed Swiss banks UBS and Credit Suisse.
Spanish bank BBVA was another strong financial feature, up 3.8 percent after Morgan Stanley upgraded it to "overweight.''
Other standout movers included mid-cap De La Rue, up 6.6 percent on talk the banknote printer might be considering breaking up its business, but Swedish telecoms operator Tele2 fell 7.6 percent after posting lower-than-expected fourth-quarter sales and falling earnings.
The FTSE Eurotop 300 index of pan-European blue chips closed 1.2 percent higher at 994.31 points -- a hair below a 17-month closing high of 995.93 points on January 28. The narrower DJ Euro Stoxx 50 index rose 1.3 percent to 2,870.98.
Equity markets leaped out of a 10-day trap last Friday as lukewarm U.S. job data painted an employment picture that is not improving as much as forecast, indicating the Federal Reserve may hold off longer than expected before raising interest rates.
Investors will scrutinize Fed Chairman Alan Greenspan's semi-annual update on monetary policy to Congress on Wednesday and Thursday, after the Fed's decision at the end of January to drop a five-month pledge to keep rates low for a "considerable period'' drove equity markets lower.
Dollar slips again
But strategists said the market rebound may be short-lived as concern over unfavorable exchange rates continued to nag.
The dollar fell to a two-week low against the euro on Monday as investors bet a Group of Seven warning, at the weekend, against "excessive volatility'' in exchange rates did not herald immediate action to support the greenback.
"It is possible that we have seen the peak in earnings expectations for this cycle,'' said Merrill Lynch quantitative strategist Nigel Tupper. "Our scenario is the weakness in the dollar is having a negative translation effect on earnings in Europe.''
"Alternatively, if the Fed were to tighten monetary policy, even a small tightening may be sufficient to slow global profit expectations given the level expectations have already reached.''
But other strategists were betting that strong earnings growth seen in the latter part of 2003 will continue for the early part of 2004 and underpin European stock prices, despite the weak dollar.
"We remain positive on equities in the near term as we expect earnings and economic data to continue surprising on the upside,'' said JP Morgan global strategist Abhijit Chakrabortti.
Across Europe, Britain's FTSE was 0.7 percent higher at 4,434 points, Germany's DAX rose 1.3 percent to 4,099, France's CAC added 1.1 percent to 3,664 and the Swiss SMI gained 1.0 percent to 5,870.
On Wall Street, the Dow Jones industrial average was flat at 10,596 points, while the tech-laden Nasdaq Composite was up 0.3 percent at 2,070.
Wanadoo led blue chips higher, up 7.8 percent on persistent speculation that France Telecom will buy the 30 percent of the French Internet provider it does not already own.
UBS and Credit Suisse rose 2.6 percent each ahead of what analysts expect to be solid fourth-quarter earnings this week.
Elsewhere, French heavy engineering company Alstom gained six percent after saying it had won two contracts with French national railway operator SNCF worth 207 million euros ($263.8 million).
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