European shares extended their rally yesterday and crept to three-year highs, led by a rise in BT as the British telecoms group avoided a break-up threat from the UK regulator.
With crude oil prices near record highs above $59 a barrel, oil majors formed the top-gaining sector on hopes of higher margins and an earnings boost. Heavyweight Royal Dutch rose 1.2 per cent and Statoil added 2.2 per cent.
The FTSEurofirst 300 index of pan-European blue chips gained 0.4 per cent at 1,150.85 points, just off an intraday high at 1,150.85. The narrower Dow Jones Euro Stoxx 50 rose 0.3 per cent to 3,190.8 points.
BT added 3.9 per cent after the UK regulator dropped a threat of a break-up and held out lighter regulation as BT pledged it would guarantee rivals equal access to its local network.
"There is no threat of a split of BT. This alone should ease the regulatory cloud that has hung over BT," Investec Securities analyst Christian Maher said.
Elsewhere in the sector, Belgacom gained two per cent. Moody's Investors Service upgraded dozens of European firms after a review of their links to governments including the Belgian telecoms group.
A Brussels court yesterday rejected a complaint by two cable operators, giving Belgacom reassurance of its right to broadcast soccer games on its new digital television service.
In a firmer technology sector, German chipmaker Infineon rallied 2.3 per cent after sources said the firm was working on concrete plans for an initial public offering of its memory chip unit, possibly in the autumn.
Siemens, which owns a stake in Infineon, followed higher, gaining 1.6 per cent to €63.20.
Siemens was spurred on as the share broke above €63. "That triggered some stops and gave it a boost," said a Frankfurt trader. Speculative buying instead of end-investors had pushed the share, another Frankfurt trader said.
Analysts valued Infineon's memory chip division at three to four billion euros, but said a spin-off was unlikely at this stage since the semiconductor market had only just begun to turn up.
"A spin-off (of the cyclical business) would in principle be welcome. Infineon would come closer to its goal of making money in downturns as well," says analyst Harald Schnitzer at DZ Bank. He put his "hold" rating on the stock under review.
In the aerospace segment, EADS was a notable gainer, hitting an all-time high of €26.11 and closing up 2.8 per cent. The share rose for the sixth session in a row, still gaining on the back of a welter of orders at last week's Paris air show.
Moody's raised EADS's ratings to A1 from A3.