By Patrizia Kokot
LONDON, June 5 (Reuters) - European shares rose on Thursday
ahead of two central bank decisions, led by banks and by
TeliaSonera <TLSN.ST>, which gained more than 7 percent after
France Telecom <FTE.PA> made a bid for the Nordic operator.
By 0850 GMT the pan-European FTSEurofirst 300 index <>
was up 0.3 percent at 1,315.38 points, having fallen 0.2
percent.
Crude oil held around $122 a barrel <CLc1> and with some
base metal prices easing, energy and mining shares lost ground
again.
"The telecom thing is takeover activity, the oils and miners
are coming down with commodities prices and the oil price going
down to $121 a barrel is probably the most interesting thing to
look at this morning along with ongoing weakness in financials,"
said Bernard McAlinden, an investment strategist at NCB
Stockbrokers in Dublin.
Both the European Central Bank and the Bank of England will
deliver their respective rate decisions and while neither is
expected to change monetary policy, inflation is set to be the
main focus.
"(The ECB will leave) 4 percent rates on hold, you can be
pretty sure of that, and just talk about inflation. I doubt that
they're going to change tack from what they said last time,"
McAlinden said.
TeliaSonera rose 7 percent, making it the largest positive
influence on the FTSEurofirst 300, after France Telecom made a
63 Swedish crown bid. France Telecom dropped 4.1 percent.
The offer is some 39 percent above TeliaSonera's closing
price on April 15 2008, the French group said.
Staying with M&A, Deutsche Postbank <DPWGn.De> added 2.4
percent after Germany's biggest retail bank reportedly received
letters of interest from four potential buyers who could soon
gain access to the group's books.
At the other end of the spectrum, Credit Agricole <CAGR.PA>
was the top percentage loser, falling more than 5 percent on
news of a lower-than-expected price for its deeply discounted
rights issue.
But RBS <RBS.L> reversed early losses and rose 2 percent,
on news that Allianz <ALVG.DE> and Zurich Financial <ZURN.VX>
are among four groups entering bids in the first round for RBS
Insurance unit.
The shares were helped also by an upgrade at Citigroup to
"buy" from "hold".
Overall, banks remained in focus as investors continue to
worry about the outlook of the financial sector as the full
impact of the credit crunch remains to be seen and persistent
inflation pressures threaten central bankers' ability to deliver
equity-supportive rate cuts.
The ECB is expected to keep interest rates at a 6-1/2 year-
high and confirm its tough stance against price pressures in the
face of a deteriorating inflation outlook. The decision is
expected at 1145 GMT, and investors are focussing on comments
from ECB President Jean-Claude Trichet at the post-decision
press conference at 1230 GMT.
"Euro zone inflation is well above the European Central
Bank's 2 percent target at a time when GDP growth is slowing.
A mixture of slowing growth and increased inflationary pressures
provide a difficult environment for equities near term, and
pricing power will be crucial in order for earnings to grow in
this environment," strategists at Cazenove said in a note.
The rate decision by the Bank of England is due at 1100 GMT
and the central bank is also forecast to leave rates unchanged.
In other news, Nestle <NESN.VX> gained 0.8 percent after
Lehman Brothers raised its stance on the food sector to
"positive".
Also in Switzerland, Roche <ROG.VX> added 1.8 percent as the
U.S. government proposed stockpiling millions more doses of the
pharma giant's antiviral drug Tamiflu to help protect people
from infection.
(Additional reporting by Amanda Cooper; Editing by Louise
Ireland)
