European Markets Update: Rumor Mill Weighs on U.K. Shares

Markets on the Continent, meanwhile, are modestly higher as they digest the Vodafone-Mannesmann deal.
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LONDON --

Baring Asset Management

reckons the

FTSE 100

will hit 10,000 within five years. "We are witnessing the fourth and final stage of the longest bull market in history" said Michael Hughes, head of the U.K. Investment Management team.

Unfortunately, the Baring story has failed to filter into the market, and rumors that a major overseas bank took a 2 billion pound hit in the bond market have certainly affected sentiment.

Trading was initially boosted this morning by corporate takeover activity, both actual and rumored, as Footsie traded up 40 points within minutes of the opening bell. But the positive mood didn't last long and the index was soon looking at a 77-point loss. It recently traded 63 points lower to 6,261.

It's a shame the

Vodafone

(VOD) - Get Report

-

Mannesmann

(MNNSY)

takeover saga is over now, bar the shouting. Vodafone celebrated early this morning, but now appears to be suffering from a massive hangover. Its shares were trading 8p lower to 362, having been down as much as 20 on arbitrage profit-taking. On the other hand,

Orange

jumped 210p to 26.70 pounds on speculation that either

France Telecom

(FTE)

or

KPN

, the Dutch group, will make a play now that the Vodafone-Mannesmann deal is done. The rerating of

Colt Telecom

continues with the price up another 298p to 38.49 pounds amid mounting bid speculation.

Reuters

(RTRSY)

, a recent favorite, caught the market's eye as it studies the firm's Internet deal with

Equant

. Reuters was up 14p to 10.60 pounds, but has since eased to 10.42 pounds ahead of Tuesday's results.

Lehman Brothers

raised its price target on the stock to 13 pounds from 11.75 after the Equant deal.

Tech stocks were supported by the

Nasdaq's

strong performance overnight.

Baltimore Technology

gained 127p to 69.87 pounds.

QXL.Com

rose 57p to 11.17 pounds and the FTSE

Techmark

index was recently 1.56% higher at 4,304.86.

Most of the major Continental bourses made modest gains in early trade Friday, as investors digested the aftermath of both the Vodafone-Mannesmann deal and rate hikes by the

European Central Bank

and other national central banks. Midday in Frankfurt, the

Xetra Dax

was up 19.95 at 7374.21, while the Paris

CAC 40

was 57.77 higher at 6207.44.

Early on, the Dax was held back by losses from its two major telecommunication components,

Deutsche Telekom

(DT) - Get Report

and Mannesmann. But by midsession DT was down only 0.30 at 83.40 euros and Mannesmann was up 2 at 327.50 euros. Mannesmann's supervisory board is expected to approve the Vodafone deal later this afternoon.

Technology shares in Frankfurt also powered ahead Friday, with software maker

SAP

(SAP) - Get Report

up 8.85 at 808.85 euros and

Siemens

surging 6.52 to 158.79 euros.

Financial issues, on the other hand, were mostly lower midday following the ECB's decision to raise its main refinancing rate by 0.25% to 3.25%.

Deutsche Bank

was down 2.85 to 80.18 euros,

Dresdner Bank

was off 0.54 to 50.26 euros and

Commerzbank

was down 0.10 to 32.90 euros.