* FTSEurofirst 300, Euro STOXX 50 both up 0.1 pct
* WM Morrison rallies after private equity takeover report
By Alistair Smout
LONDON, Feb 19 (Reuters) - European shares pared earlylosses in late trade on Wednesday, tracking a rally in WallStreet, with WM Morrison gaining in the afternoon after a reportthat the grocer may be taken over by private-equity firms.
The FTSEurofirst 300 mounted a recovery in thinvolumes to close up 0.1 percent at 1,338.67, as Wall Streetturned higher after a cautious start before U.S. Federal Reserveminutes were released.
"We've seen the U.S. markets rally since they've opened, andEurope has followed suit. Investors are hoping that policy isgoing to be able to remain more supportive than some ... aregiving it credit for," said Will Hedden, a sales trader at IG (LSE: IGG.L - news) .
"We're not expecting tapering to come off the table, but theFed should not be getting any more hawkish."
WM Morrison rallied 4.9 percent after Reutersreported that bankers were working on debt-financing packages ofaround 5 billion pounds ($8.35 billion) to back a sale of theBritish supermarket chain to private-equity funds.
"It seems like it's coming from a good source, and it'd beenspeculated for a few weeks. If you're going after one of thesupermarkets, it's one of the easier targets ... and this is thefirst credible story that it's moving forward," Hedden said.
"People like the story, and we've seen a lot of buying onthe back of it."
Better earnings news helped to support the market. Shares inCarlsberg surged 7.1 percent as the world's fourthlargest brewer raised its dividend by a third thanks to growthin Western Europe and Asia offsetting sluggish sales in Russia,where the economy is slowing.
Lafarge, which derives 58 percent of its salesfrom emerging markets, confirmed its targets despite a hit fromvolatile currencies in the fourth quarter, betting on continuedgrowth in emerging markets and a recovery in North America andEurope. Its shares rose 3.2 percent.
The market was in negative territory for most of the day,pulling back from overbought conditions, and Valerie Gastaldy,head of technical analysis firm Day-By-Day, said that the EuroStoxx 50 could hit 3,050 by Friday. It closed up 0.1percent at 3,120.80 on Wednesday.
Seamless steel tube maker Tenaris fell 6.4 percentto the bottom of the pan-European FTSEurofirst 300 index after U.S. trade authorities decided not to impose tariffson South Korean imports of oil and gas pipe. French peerVallourec fell 4.5 percent.
Tenaris and Vallourec, which respectively generate 49percent and 29 percent of their sales in North America, hadsigned a petition complaining that manufacturers in South Koreaand other countries were selling pipe in the United States atunfairly low prices.
"Many people in the market were thinking that the key forimproving the pricing power would be some reduction in theimports coming from South Korea," said Julien Laurent, energyequity analyst at Natixis (Paris: FR0000120685 - news) .
"I assume that the consensus will have to downgrade itsestimates (of future earnings per share) a bit. I would say forTenaris it would be more than 5 percent."
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