Europe: M&A boost helps shares stay at one-year high

[LONDON] European shares held around one-year highs on Thursday, supported by mergers and acquisitions-related optimism, with Johnson & Johnson's US$30 billion deal to buy Actelion lifting shares in the Swiss biotech firm.

Actelion surged 19.4 per cent after the US healthcare giant's move to make an all-cash purchase that includes spinning off Actelion's research and development pipeline. The acquisition gives J&J access to the Swiss group's line-up of high-price, high-margin medicines for rare diseases.

"We are likely to see more of such deals as many companies that want to merge or acquire other firms could use the current low bond yield environment to fund such initiatives," said Christian Stocker, strategist at UniCredit in Munich. "I am very positive on European stocks in the first quarter as several sectors, in particular financials and industrials, are witnessing an increase in their earnings momentum."

The STOXX 600 added 0.2 per cent, building on strong gains seen in the previous session when the pan-European index ended at its highest level since end-December 2015. Germany's DAX rose 0.4 per cent to its highest since May 2015, while UK'S FTSE ended flat.

The broader market also got help from some positive earnings reports. Franco-Italian chipmaker STMicroelectronics rose 7.6 per cent after posting in-line results for the final quarter of 2016, driven by solid phone and car part sales and improved factory utilisation.

Diageo, the maker of Johnnie Walker Scotch and Smirnoff vodka, rose 3.6 per cent after the world's largest distilled drinks company reported a better-than-expected rise in sales, helped by improvements in its US business that boosted confidence in its future performance.

"We are pleased to see Diageo doing exactly what it is meant to do: drive out organic growth from its portfolio of premium global brands, throwing off cash as it does," said Steve Clayton, fund manager of the Hargreaves Lansdown Select UK Shares fund, which holds a position in Diageo.

Royal Bank of Scotland added 2.4 per cent as investors cheered a 3.1 billion pound (S$5.6 billion) provision taken by the bank to settle claims in the United States that it mis-sold toxic mortgage-backed securities.

Intrum Justitia was up 6.9 per cent after the Swedish debt collector's fourth quarter operating profits came in above market expectations.

However, some companies disappointed on the earnings front, resulting in a sharp sell-off in their shares.

Daily Mail and General Trust fell more than 8 per cent, the top faller on the STOXX Europe 600 index, after the owner of the Daily Mail newspaper cut its revenue outlook for its Information division. It said the unit had been hit by a slowdown in the British property market.

Unilever fell 4.7 per cent after the consumer goods maker reported lower-than-expected fourth-quarter sales growth, blaming the Indian government's withdrawal of high-value notes and a weak economy in Brazil.

REUTERS