Telecoms lead European surge on auction result

The telecoms sector led the way in Europe again. Share prices surged in the wake of the Italian auction of third generation mobile licences, which turned out cheaper than bidders had expected.

The Italian government confirmed the auction was over and that it would not attempt to rerun it. Investors decided it was time to take a rosier view of a sector which has taken punishment for the high cost of UMTS (Universal Mobile Telecommunications System) licences. Many companies are trading 40-50 per cent below the year's peaks.

France Telecom was up 7.2 per cent to €121.10 on top of a 5 per cent gain the day before, while Telefonica rose 5.5 per cent to €22.69. Telecom Italia Mobile, the biggest Italian mobile operator, ended 3.3 per cent higher. Big cap telecoms not involved also rose, in particular Deutsche Telekom which was up 9 per cent to €43.05. The sector also contained company-specific good news. The Dutch-based KPNQwest, a pan-European data communications company, jumped 18.9 per cent to €29 on third-quarter earnings. Its parent KPN Telecom rose 7.6 per cent to €24.80.

On the Neuer Markt in Frankfurt, MobilCom bounded 26.3 per cent higher to €75.55.

Ericsson bounced back strongly after its recent profit warning. Shares closed 7.9 per cent higher at SKr129.50, while Nokia was up 5.7 per cent at €48.35 and Alcatel up 6.5 per cent to €80.90.

Technology stocks were strong, too. German software leader SAP was up 8.8 per cent to €236, the best performer on the Xetra DAX. Chipmakers had a mixed reaction to a warning from the US chipmaker National Semiconductor. STMicroelectronics fell 2.8 per cent but Infineon was up 4.6 per cent.

There were clear signs of technical rebound yesterday as sector analysts took a more positive view ahead of tomorrow's figures from HypoVereinsbank and next Wednesday's results from Deutsche Bank.

The day's best performance came from Commerzbank, which jumped 6.2 per cent to €33.14 as investors responded to the news that it had pulled away from its "defensive ring" deal with Banco Santander Central Hispano.

Europe's biggest biotechnology company Serono fell 6.5 per cent after news that extraordinary gains contributed a large part of its 83 per cent rise in third-quarter profits. Shares had risen 13 per cent in the last three sessions prior to the results.