Morgan Stanley Dean Witter News

Defense companies, which have suffered mightily on the stock markets of late, took a sharp upturn, led by General Dynamics Corp., which posted strong earnings last Wednesday and was upgraded by brokerage SG Cowen Thursday. Shares of General Dynamics, builder of the Seawolf submarine and M-1 tank, as well as Gulfstream corporate jets, gained as much as 5-1/8 in morning trading on the New York Stock Exchange, before settling back to 55-3/4, up 3-3/4. Exchange. A spate of aerospace- and defense-related companies posted earnings that mostly beat Wall Street expectations Wednesday, including commercial aircraft and defense giant Boeing Co. and United Technologies Corp., which makes engines and helicopters, but also elevators and air conditioning systems.

Offshore oil equipment and services provider Coflexip set an all-time high on Thursday following a price target upgrade by a major broker and on bright prospects for North Sea contracts. Coflexip was quoted up 6.67 percent at 152 euros, the broad market's best performer. Earlier, it had surged to a record 156 euros after Morgan Stanley Dean Witter lifted its price target to 200 euros from 165 euros and maintained a "strong buy" recommendation.

Morgan Stanley Dean Witter raised its recommendation today on French oil services company Bouygues Offshore to "outperform" from "neutral" and gave a price target of 55 euros ($48.47) for the stock. "Sector outlook remains strong for 2001 in our view," said MSDW analysts, adding that valuation on Bouygues Offshore was now compelling on their estimates. Bouygues Offshore shares were up 1.28 percent at 44.97 euros ($39.63).

Morgan Stanley Dean Witter raised its rating for U.K. cruise operator P&O Princess Cruises Plc to "outperform" from "neutral" with a 12-month price target of 360 pence. No further details were immediately available. - (Reuters)

Morgan Stanley Dean Witter said one of its analysts started coverage of cruise line Carnival Corp. with a neutral rating on Friday. The analyst set a $37 price target. Further details were not immediately available. The shares closed on Thursday at $29.12.

Crude oil tanker owner and operator American Eagle Tankers Inc. Ltd. has filed for an initial public offering that could raise up to $132 million for the unit of Singapore's Neptune Orient Lines Ltd. American Eagle, which is based in Jersey City, N.J., plans to use the net proceeds from the IPO to expand its fleet of tankers, which currently numbers 24, it said on Tuesday in a filing with the U.S. Securities and Exchange Commission. The company is selling 6.75 million common shares for between $17.60 and $19.50 apiece, which would give it a potential market value of $495 million based on the high end of the price range and about 25 million shares outstanding.

In order to help negotiate its pending merger with Kawasaki Steel Corp., NKK Corp., has called upon Goldman Sachs Group Inc., while Kawasaki has reportedly hired Morgan Stanley Dean Witter to help with negotiations regarding the possible business transaction. Earlier this year, the same two advisers were hired by Mitsui Chemicals Inc. and Sumitomo Chemical Co. to help negotiate the union of those two businesses, which will form the world's fifth-biggest chemical company. A value for the steel and chemical mergers will be determined when the parties hammer out a ratio for their share swaps, likely to be later this year, the paper said. The transactions are likely to be two of the biggest deals this year. Together they are reportedly valued at as much as $30 billion including debt.

Oil importers last week were facing the prospect of a severe winter price spike as OPEC exporters prepared to turn the screw on stringent supply restrictions. Benchmark Brent crude in London struck new 31-month highs last week at $22.30 barrel -- another 32 cent rise on top of Tuesday's 60 cent jump which took prices above $22 for the first time since February 1997. "As long as key producers give no hint of relaxing output restraint the price of Brent will probably approach $25 in the fourth quarter," said Mike Barry of London's Energy Market Consultants. "The latest price rise is certainly a vote of confidence in OPEC compliance with its output cuts," said Peter Gignoux, head of the London energy desk at brokers Salomon Smith Barney.

Resurgent world oil prices will blaze towards the highest level since the Gulf War this winter as key producers stick to strict supply curbs, a Reuters survey found last week. Analysts and consultants ruled out any chance that export cartel OPEC's ministerial meeting this month might relax output limits that have already fostered a stunning price rally to 23-month highs. If the northern hemisphere winter proves harsh world benchmark Brent could balloon to post-Gulf War highs at $25 a barrel as the supply stranglehold demolishes global stocks of spare stored oil, they added. "It could go over $25 a barrel as inventories keep tightening, especially if there is a cold snap. The Y2K factor could tighten it too," said Peter Hitchens of Williams de Broe.

The absence of quality new merger opportunities will force oil companies to keep spending tight even though this year's oil price recovery has given them far more cash to work with, analysts said. Oil companies are now locked into the regime of tighter financial discipline they promised share investors during last year's crash, and will be unable to embark on the usual rush for production growth as the market recovers, they added. "The pendulum cannot swing quickly back and capital spending is not going to rebound," Fergus Macleod of Deutsche Bank said. "Oil companies have got to deliver on the agenda they set themselves. Fears of losing equity confidence mean oil companies will take around two years to raise spending in pursuit of market share left open by OPEC producers' supply cuts…

Tanker markets are finely balanced but OPEC production cuts compliance will stop the shipping industry benefiting from its usual winter upturn, investment bank Morgan Stanley Dean Witter said. However, there was a bias toward overcapacity as new tonnage was delivered and OPEC cutback compliance continued at high levels for another quarter, the firm said. Morgan Stanley added that it expected shipping rates to respond positively if OPEC increased production volumes in the second half of the year. However, OPEC producers have suggested in the past few days they may extend the cutbacks throughout the year. Morgan Stanley said utilization rates for the total tanker fleet fell to 88 percent in 1999 from 91 percent the previous year.