By Sarah Turner
European shares advanced on Friday, as gains for auto makers such as Fiat and follow-through from this week's U.S. interest-rate cut offset worries about how the turbulence in financial markets is going to play out.
The pan-European Dow Jones Stoxx 600 index rose 0.5% to 376.74. The German DAX 30 index closed up 1% at 7,808.82, while the U.K.'s FTSE 100 index climbed 0.4% at 6,453.80 and the French CAC-40 index tacked on 0.3% at 5,704.85.
Auto shares took the lead as Goldman Sachs upgraded the sector to attractive from neutral, saying the market is assuming either a substantial slowdown in the global economy or ignoring restructuring benefits.
The broker's conviction buys are Fiat and Renault; it rates Peugeot as conviction sell. Fiat's shares rose 4.8%, with Renault increasing 3.3% and Peugeot moving 1% higher. Additionally, shares of Germany's Volkswagen rose 1.1%, while French tire maker Michelin climbed 2.4%.
Also propping up the sector, light sweet crude-oil prices eased back in energy trading and the euro moved off highs in foreign exchange, after weaker-than-expected euro-zone manufacturing data were reported.
Banks lagged. Shares of Allied Irish Banks fell 1.3%, while Deutsche Bank lost 0.4%. Dutch bank Fortis managed to put in a better performance, its shares trading up 0.1%. The company said it expects adjusted 2007 profit to at least match analyst forecasts and announced a rights issue. Underlying business activity has been "hardly affected" by the turmoil in global capital markets, Fortis said, as credit protection it bought last year had partially offset widening spreads and as its insurance operations have generated solid results.
In technology, shares of computer software maker SAP climbed 0.4%, gaining after U.S. rival Oracle /zigman2/quotes/202180826/composite ORCL +0.88% reporting quarterly financial results late Thursday that exceeded expectations. "Based on our channel checks, we believe SAP is on track to meet out third-quarter license revenue estimate of €719 million," said analysts at Goldman Sachs.
Meanwhile, Carnival Corp. /zigman2/quotes/210414141/delayed UK:CCL +0.21% saw its shares slip 0.1% in London, as analysts weighed the cruise operator's third-quarter results. "The results were good with a positive outlook and confirmation of progress in Europe," noted analysts at Dresdner Kleinwort, reiterating a buy rating on the stock. Credit Suisse raised it target price on Carnival to 2,500 pence, up from 2,300 pence previously, noting that the results beat estimates at the earnings-per-share level and that the demand outlook into 2008 has improved.
Elsewhere, shares of Stora Enso surged 6.2%. Ohio-based coated-paper maker NewPage Corp. said it's agreed to buy the Finnish firm's North American paper manufacturing operations for $1.5 billion in cash, a $200 million note and a 19.9% equity interest in the new company.
Write to Sarah Turner at firstname.lastname@example.org