Media stocks power Europe gains

LONDON, England (CNN) -- European stocks reversed earlier losses to make strong gains in midday Monday trading as media stocks soared.

Vivendi Universal (PEX), Europe's biggest media company, climbed 8.6 percent to 10.10 euros after its chief executive said it is set to sign a 2 billion euro funding deal. (Full story)

Granada (GAA) jumped 7.4 percent to 80.25 pence on news Britain's biggest commercial broadcaster and rival Carlton Communications (CCM) would join forces to boost advertising revenue. Carlton rose 8 percent to 139.25 pence.

London's FTSE 100 rose 1.6 percent to 4,396.8 and Frankfurt's electronically traded Xetra Dax, which has fallen almost 30 percent this year, advanced 0.9 percent to 3,716.75, while the CAC 40 blue chip index in Paris jumped 1.8 percent to 3,433.78.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was up 1.6 percent, with the media, information technology, insurance and computer services sub-sector leading gains.

But many market watchers are concerned markets may not be able to hold on to gains.

"Prices are looking fragile and could retrace some of their gains made since July 24 on the back of recent economic weakness, although we do not go as far as forecasting a double dip in the U.S. economic cycle,'' Sharon Coombs, European strategist at investment bank HSBC Securities, told Reuters.

"Trade is directionless as people are on holiday and the agenda for today and tomorrow is very spartan."

Stephen King, economist at HSBC, told CNN that there was an "an absence of any clear signs of a strong economic recovery over the next two to three years."

"You would think low interest rates and loose fiscal policy would stimulate growth, but Japan has had similar conditions over the last decade. Companies and people there have proved they would rather pay off debts than borrow more money."

"The economy is like a drunk with a nasty headache. Its not going to recover quickly. There has been a lot of damage to the body, falling equity markets have pummelled confidence, and they are cautious about spending."

Deutsche Telekom (FDTE), Europe's biggest telecom operator, rose 0.9 percent -- recovering from earlier losses after Focus magazine said the company will post on Wednesday its biggest ever interim net loss of 3.5 billion euros.

British retailer Arcadia Group (AG-) rose 13.6 percent to 342.5 pence amid hopes that entrepreneur Philip Green will make a higher offer. The company said on Sunday it turned down a takeover bid worth 365 pence a share, because it was too low. (Full story)

And engineering company Invensys (ISYS) rose 7.7 percent to 66.3 pence after it sold its Sensor Systems business to diversified manufacturer Honeywell of the United States for $394 million.

While most technology stocks made strong gains, the world's biggest producer of mobile networks Ericsson fell 5.7 percent to 5 euros.

Thursday was the first day Ericsson shareholders could sell their rights to subscribe for the one-for-one issue, set to raise 30 billion crowns for Ericsson to pay off debt and finance restructuring. It suffered as investors switched from shares to rights, effectively buying an option on the stock to safeguard against a share price fall below 3.8 crowns, according to Reuters.

The AEX index in Amsterdam rose 2.1 percent and Milan's MIB30 index gained 1.3 percent, while the SMI in Zurich added 1.6 percent.

In the U.S. on Friday, chips, computer hardware and Internet stocks pushed techs higher both Friday and for the week, while mixed economic data and weakness in aviation kept the blue chips from participating as fully.

The Nasdaq composite rose 16.00 to 1,361.01; for the week it gained 4.2 percent. The Dow Jones industrial average lost 40.08 to close at 8,778.06; but for the week it gained 0.37 percent. The Standard & Poor's 500 index lost 1.48 to end the day at 928.77; for the week it rose 2.21 percent.

Wall Street was expected to open higher later on Monday. S&P 500 index futures rose 3.1 points to 931.10 on the Globex trading system, while fair value, a measure that takes account of interest costs and dividend payments, was calculated at 930.67.