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Europe: Shares supported by miners, telecoms; Unilever slump weighs

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[MILAN] European shares rose on Monday, helped by stronger telecoms and mining stocks, but a slump in Unilever following Kraft Heinz's withdrawal of a US$143 billion takeover bid weighed on the broader market.

The pan-European STOXX 600 index ended the day up 0.2 per cent, just below its highest level since early December 2015 hit on Wednesday.

Unilever fell as much as 9 per cent before recouping some of its losses to close down 6.9 per cent, the biggest faller on the STOXX index.

Backed by Warren Buffett, Kraft had wanted to buy its bigger rival but its offer was flatly rejected on Friday by Unilever.

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Shares in Unilever however stayed above the levels they were trading at on Friday before Heinz's plans emerged, as investors bet on what the Anglo-Dutch consumer goods group could do next.

"The ball is in Unilever's court now to prove its shareholders that it has more value to offer as a standalone company," said Jauke de Jong, analyst at AFS Group in Amsterdam.

According to analysts at Societe Generale, Unilever should consider a big share buyback or make a strategic acquisition. They said buying US brand Colgate would be a game changer and would allow the group to remain independent.

Among top gainers were the Frankfurt-listed shares in South African retail group Steinhoff. The stock rose 6.5 per cent after it terminated talks to sell its Africa retail assets to Shoprite.

Elsewhere activity was driven by some earnings-related news.

Boskalis fell 5.2 per cent after the marine construction firm warned of a 840 million euros charge due to deteriorated market conditions in the offshore energy sector.

German plastics maker Covestro, the company that parent Bayer plans to divest, slumped 4.3 per cent as investors took profits after it posted a bigger-than-expected earnings gain.

In spite of some disappointing updates on Monday, European earnings have been positive so far. A surge in merger and acquisition activity has also contributed to the recent rally in European shares.

"European economies are recovering, so you are looking at a cleaner acquisition target, and with the dollar having been extremely strong, targets in euro and sterling are much more attractive (to US acquirers)," said Stephen Macklow-Smith, European equity strategist at JP Morgan Asset Management.

Germany's DAX outperformed its European peers, gaining 0.6 per cent as Italian and French shares dipped.

The German index's large share of cyclical stocks means it is well placed for a global reflationary environment, JP Morgan analysts said in a note, naming the DAX their top European overweight index for 2017.

REUTERS

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