Volkswagen shares put in another stunning performance yesterday as investors continued to applaud the carmaker's restructuring plans.
The stock climbed 5.2 per cent to €58.27, taking its rise over the past two days to some 15 per cent.
On Friday, VW announced plans to axe up to 20,000 jobs over the next three years. It also unveiled much better than expected quarterly earnings, raised its dividend, and said it was cancelling its treasury shares.
"In our opinion, Friday was the most shareholder-friendly day in VW's history," said Adam Jonas, analyst at Morgan Stanley.
But he added: "We are still of the view that 2006 will be a very challenging year to grow earnings from 2005 levels, and restructuring only provides breathing room, while new product execution must drive any sustainable recovery."
Morgan Stanley upped its price target from €39 to €48, but kept its rating on the stock at "underweight".
WestLB also raised its target price for VW but maintained its "hold" rating.
UBS, however, upgraded the stock from "reduce" to "neutral" as well as raising its target price from €38 to €55.
Renault was caught in VW's slipstream, gaining 5.3 per cent to €83.90. Last week, the group set out a four-year plan aimed at making the company Europe's most profitable mass-market carmaker by 2009.
Elsewhere in the sector, Porsche climbed 3.7 per cent to €690.33, DaimlerChrysler added 4.1 per cent to €50 and BMW rose 2.6 per cent to €40.63.
Those gains helped the FTSE Eurofirst 300 index rise 8.03 points, or 0.6 per cent, to 1,332.88.
ThyssenKrupp, the steelmaker, rose 3.6 per cent to €20.50 after reporting quarterly profits that were down from the previous year but still in line with forecasts.
WestLB upgraded the shares from "hold" to "add", citing a strong order intake, particularly in carbon steel, and an expected improvement in stainless steel demand in 2006.
The day's takeover speculation centred on Clariant, following reports that the Swiss chemicals group might be a target for private equity companies CVC Capital Partners and Permira.
However, it is understood that CVC is not involved. Clariant said it did not comment on rumours. Clariant shares finally settled at SFr20.70, up 2.7 per cent, having earlier touched SFr22.30.
Puma, the sportswear and equipment maker, also pared an early advance to close just 0.1 per cent firmer at €290.25.
