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12:44GMT 26Jan2009-Stratex soars after Oksut drilling results

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Shares in Stratex International soar 20 percent after the exploration and development company unveils drilling results from Oksut in central Turkey, where it discovered gold in central Turkey.

Fox-Davies Capital retains its "buy" recommendation on the stock, saying that the "most impressive result" was a 93.60 metres intersection grading 5.61 g/t gold in oxide material.

"We do not yet know the true thickness of the 93.6 metre intersection but, taken in context with early drill results from last year and the numerous other prospect targets in the area, the mineralising "system" does appear to be sizeable," says the broker.

Fox-Davies says it therefore continues to support Stratex management's belief that these results "further underline the significant potential of this project".

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12:50GMT 26Jan2009-Markets could turn up later in 2009 - Morgan Stanley

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Stock markets could turn higher this year but the preconditions for a sustained rally are not yet in place, Morgan Stanley says in a strategy note, reiterating its portfolio preference for cash and defensive shares.

"Our three signposts for the next growth cycle/bull market ... will give us an advance warning, maybe as early as later this year," Morgan Stanley says.

The end of the bear market will come when profitability has normalised, with return on equity back below 12 percent; when U.S. house prices have stabilised, probably by Q2, 2010; and once banks' balance sheets are sufficiently repaired that credit starts to flow in the economy once more," the U.S. bank says.

"Growth is more important than inflation in deciding whether to buy or sell equities. For at least another 1-2 quarters we think deflation fears will linger," Morgan Stanley says, recommending in the equities space defensives such as pharma, telecoms and tobacco as well as some lower-risk insurers and strong-balance sheet cyclicals such as mobile phone maker Nokia.

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12:27GMT 26Jan2009-Jenoptik down, Commerzbank says take profits, downgrades

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Shares in Jenoptik fell 7.45 percent to 5.09 euros per share after the German TecDAX-listed supplier of lens and optical equipment reports inline fourth-quarter figures, but Commerzbank downgrades the stock to "hold" from "reduce" recommending investors lock in profits now.

"The outlook statement for 2009 and fourth-quarter order intake confirm our view that earnings will decline in 2009," Commerzbank says in a note to customers.

"Against this backdrop, we regard the recent rally of the shares (up 57 percent since mid-November) as a good opportunity to take profits..." the brokerage adds.

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12:26 26Jan2008 - Italy's Indesit up on merger speculation

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Italian appliances maker Indesit Co is up about 6 percent after la Repubblica newspaper says it is studying a possible merger.

The newspaper says potential partners could be BSH, a joint venture by Germany's Robert Bosch GMBH and Siemens AG, or Turkey's Arcelik AS.

A company source says no merger is under review.

"Indesit could tie up a partnership with Bosch-Siemens, while we think the probability of a deal with the Turkish company is low," said a trader.

Reuters messaging rm://sabina.suzzi.reuters.com@reuters.net

12:22GMT 26Jan2009-UK Small Caps rise 0.2 percent midday

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The FTSE Small Cap index rises 0.2 percent in midday deals, underperforming both blue chips, up 1.4 percent, and midcaps, which gain 0.5 percent.

The FTSE Developed European Small Cap index is 1.7 percent firmer, while the FTSEurofirst 300 adds 1.4 percent.

Stratex International soars 20 percent after the exploration and development company unveils drilling results from Oksut, its gold discovery located in central Turkey.

"The results are extremely encouraging and indicate the significant potential of this deposit," says house broker Hanson Westhouse.

Semiconductor maker e2V Technologies slides almost 31 percent as the company says it sees full-year adjusted profit before interest and tax below market expectations, due in part to an "increasingly challenging" outlook in the fourth quarter.

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12:10GMT 26Jan2009-Pharmas rise as Pfizer, Wyeth merge

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Shares in pharmaceutical stocks are higher as Pfizer acquires Wyeth for $68 billion although traders are skeptical on whether the move will a spate of further acquisitions in the sector.

The deal will help Pfizer cope with a major gap in revenue in 2011, when its blockbuster Lipitor cholesterol treatment will begin to face U.S. generic competition. Next year, Wyeth loses patent protection on its own top drug, the antidepressant Effexor XR.

But some analysts are unimpressed by the deal.

"We think this is a backward step and is not without risks. Wyeth faces significant claims by more than 10,000 women in the US who allege that hormone replacement products Prempro and Premarin can cause breast cancer," says Jeremy Batstone-Carr, at Charles Stanley.

"However, without a major acquisition for Pfizer its earnings could be hit hard," he adds.

"I don't think further acquisition is the answer in the sector. Companies will continue with strategies to build exposure East through agreements with generic operators in Asia. Pfizer of course really needed to do the deal as its earnings could be hit. But, I don't expect to see any major follow through in this.

Other analysts says a merger of Pfizer and Wyeth could trigger a wave of consolidation in the cash-rich pharmaceutical sector as drug makers look to diversify revenues in the face of competition from generic-drug rivals.

"The outlook for the industry has steadily waned, (with) industry P/E multiples declining under the combined onslaught of price pressure, aggressive generic competition and low R&D productivity," Deutsche Bank analysts say in a note.

"The result is that many leading companies face a decline in revenues and earnings next decade, as profitable products reach the end of their patented lives and are not replaced by new drugs," the analysts say, adding that AstraZeneca could be a target, though there were also reasons it might not happen.

AstraZeneca, GlaxoSmithKline and Novartis are 1-2.1 percent higher.

Reuters Messaging:joanne.frearson.thomsonreuters.com@reuters.net Keywords: MARKETS EUROPE STOCKSNEWS

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