1:00PM NY European markets rallied, lifted by deal talk.
European stocks rallied on Thursday, boosted by deal talk, strong gains in the shares of resource stocks and strong earnings from Bayer. Tobacco stocks were the best performers on merger speculation. Imperial Tobacco rose 8.6% after it approached Franco-Spanish rival Altadis over a potential offer worth $15 billion. Shares in Altadis surged 17% to 45.38 euros. Among other tobacco companies, British American Tobacco rose 2.8% and Swedish Match climbed 6%. Resources stocks were also notable gainers, as miners including Antofagasta and Anglo American rallied. German drug and chemicals group Bayer rose 3.3% after it announced a 5.4% rise in net profit, driven by growth at its health-care division and a tax gain. Anglo-Dutch consumer products group Unilever rose 5.2%, following an upgrade at Credit Suisse. On the side of the losers, shares of French smart-card maker Gemalto lost 8.9%, PartyGaming shares weakened 4.7%. The German DAX 30 climbed 2.1% at 6,585.47, the French CAC 40 rose 1.8% at 5,389.85 and the U.K. FTSE 100 gained 2.2% at 6,133.20.

Crude oil prices hovered over $58 a barrel, as OPEC said it will maintain oil production at existing levels. Light, sweet crude April delivery rose 14 cents $58.30. Heating oil fell to $1.702. Natural gas lost 5 cents to $7.032 per 1,000 cubic feet. London Brent slipped 18 cents to $60.88. The U.S. dollar traded mixed against its major currency rivals. The euro was quoted at $1.3246, up from $1.3224. The dollar bought 117.18 yen, up from 117.03. The British pound was unchanged at $1.9357. European gold prices rose. In London gold traded at $647.75 per troy ounce, down from $638.90. In Zurich, the precious metal traded at $646.35, up from $639.65. Silver rose to $12.99, up from $12.64.


11:30AM Wall Street traded higher, boosted by merger activity.
U.S. market averages traded slightly in the positive, as enthusiasm over merger activity offset the surprisingly high wholesale inflation index in February. Producer prices jumped 1.3%, well above the 0.5% analysts were expecting. Meanwhile, the New York Federal Reserve''s Empire Manufacturing survey came in at 1.85, sharply below the 17.75 economists were predicting. However, there were positive economic data that gave market a boost. The Labor Department said the initial jobless claims dropped by 12,000 to 318,000 last week.

On the merger-and-acquisition news front, WebEx Communications (WEBX: chart) surged 24% after Cisco Systems (CSCO: chart) agreed to acquire the online meeting company in a deal worth $3.2 billion in cash, or $57 per share. That represents a 23% premium over WebEx''s closing price on Wednesday. In other deal news, IntercontinentalExchange made an unsolicited offer to merge with the parent of the Chicago Board of Trade in a deal worth $10 billion. The bid by ICE sent CBOT (BOT: chart) up 14%, while IntercontinentalExchange (ICE: chart) slipped 2.8%.

On Thursday, market favored financial shares that had recently suffered sharp declines amid worries in the subprime mortgage market. Shares of Wells Fargo & Co. (WFC: chart) gained 2.4%, Countrywide Financial Corp. (CFC: chart) climbed 5.1%. Bear Stearns Cos. (BSC: chart) traded up 2.5% after it reported better-than-expected q1 earnings. Bear expects large bulk sales of troubled mortgages to give the investment bank an opportunity to profit from the subprime crisis. In late morning trading, the Dow Jones industrial average rose 25.64, or 0.21%, to 12,159.04. The Standard & Poor''s 500 index gained 5.17, or 0.37%, to 1,392.34, and the Nasdaq composite index advanced 4.46, or 0.19%, to 2,376.20. Bonds were flat despite the high producer price index. The yield on the benchmark 10-year Treasury note was at 4.54%, unchanged from late Wednesday.


9:45AM Wall Street opened mixed amid higher-than-expected wholesale inflation.
U.S. stocks opened mixed, reflecting higher-than-expected inflation at the wholesale level and initial jobless claims drop. Investors'' hopes of interest rate cuts dampened, as wholesale prices unexpectedly jumped 1.3% in February amid a big increase in energy prices and food costs. Even excluding food and energy prices, the core PPI rose 0.4%, double the 0.2% rise that analysts were predicting. In merger-and-acquisition news, Cisco Systems (CSCO: chart) said that it agreed to acquire the online meeting company WebEx Communications (WEBX: chart) in a deal worth $3.2 billion in cash, or 57 per share. That represents a 23% premium over WebEx''s closing price of $46.20 on Wednesday on the Nasdaq Stock Market. Shares of WebEx surged 24%, wkile Cisco lost 0.3%.

Financial shares were notable gainers in morning trading, boosted by deal news in the sector. Shares of CBOT Holdings (BOT: chart) rallied about 15% after rival InterContinental Exchange (ICE: chart) made a surprise bid to acquire the company for about $10 billion. Shares of Bear Stearns (BSC: chart) gained 1.9% after it said Q1 net income rose 8%, beating analyst expectations. Dow components J.P.Morgan d (JPM: chart) and Citigroup (C: chart) rose 1% each.

Airline stocks moved higher in early trading, with Continental Airlines shares leading advancers after J.P. Morgan upgraded the carrier''s stock to neutral. Continental Airlines (CAL: chart) rose 3.4%, Mesa Air Group (MESA: chart) shares rose 2.1%, and UAL Corp. (UAUA: chart) gained 2%. Telecoms were trading mostly lower, dragged by Sprint Nextel (S: chart), down 1.3%. AT&T (T: chart), Verizon Communications (VZ: chart) lost 0.6% each, while Juniper Networks (JNPR: chart) rose 2.3%. In the first hour of trading, the Dow Jones industrial average fell 18.42, or 0.15%, to 12,114.98. The Standard & Poor''s 500 index slipped 1.86, or 0.13%, to 1,385.31, and the Nasdaq composite index rose 2.14, or 0.09%, to 2,373.88.

Wholesale inflation jumped 1.3% on food and energy costs.
Thursday morning, the Department of Labor released its closely watched report on producer price inflation in the month of February, showing that prices rose much more than economists had expected amid a rebound in energy prices. The report showed that the producer price index rose 1.3 percent in February after an unrevised 0.6 percent decrease in January. The rise in prices came in well above economist estimates of an increase of about 0.5 percent. A rebound in energy prices contributed to the bigger than expected increase in prices, with energy prices rising 3.5 percent in February after falling 4.6 percent in January. Gasoline prices rose 5.3 percent following a 13.0 percent drop in the previous month.

The notable increase in prices was also partly due to a continued increase in food prices, which rose 1.9 percent in February following a 1.1 percent increase in January. This marked the third consecutive month that food prices rose more than 1 percent. The Labor Department also said that the core producer price index, which excludes food and energy costs, rose 0.4 percent in February after rising 0.2 percent in each of the two previous months. Economists had been expecting another 0.2 percent increase. The bigger than expected increase in prices is likely to raise some concerns about the pace of inflation, which in turn will likely offset optimism that the Federal Reserve will lower interest rates in the near future.


9:30AM London bounced back Thursday on M&A and large-cap rally.
The UK market was higher on Thursday. By mid-day, the FTSE 100 was 100 points higher at 6,101.4.

Advancers

Imperial Tobacco rallied after finally making a cash bid for Franco-Spanish rival Altadis following months of speculation. Imperial shares were 6.9% higher while BAT gained 2.2% in sympathhy and in anticipation of a consolidation in the sector.

The benchmark index was further bolstered by strong resultss from Prudential and William Morrison and confirmation from Cadbury Schweppes that it was considering a sale of its US drinks division. Cadbury shares were 5% higher. Prudential firmed 4.4 % and William Morrison was 3% higher. J Sainsbury was 4.3% higher on continued reports that the CVC consortium was close to tabling an offer for the supermarket. Mining stocks were also higher, with BHP Billiton up 4.4%.

In the mid-caps, it was another year of excellent progress for Aegis Group, 4.4% higher, on Thursday, as the media buyer posted a 16% rise in underlying pre-tax profit and added its prospects were promising.

Decliners

The only large-cap decliner was AstraZeneca, the pharmaceuticals group, down 0.2%. Also, Industrial products firm Chapelthorpe plunged by more than a fifth after it warned that the current financial year will be hit by slow trade and problems at its umbrella frames unit. Chapelthorpe was down 22.5%.