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Europe: Deutsche merger move take stocks rally to fourth day

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[BENGALURU] European stocks rose for the fourth session in a row on Monday as a flurry of dealmaking, including merger talks between Deutsche Bank and Commerzbank , spurred gains in the financial services sector.

Shares in the two German lenders rose between 4 per cent and 7 per cent, and boost banking stocks across the region, despite the likelihood of fierce opposition from local unions as a merger could threaten as many as 30,000 jobs over the long term.

Europe's banking sector rose more than 1 per cent, with Italian lenders Banco BPM and UBI Banca gaining. That sent the pan-European Stoxx 600 index's up 0.27 per cent to a fresh five-month high.

"If this (deal) works out, people are going to be looking at ... if this could be an example of what needs to be done to create further stability and less reliance on the central bank," said Craig Erlam, senior market analyst at Oanda.

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Also caught in the merger wave was German insurer Allianz , which Bloomberg reported was exploring combining its asset management business with DWS, mostly owned by Deutsche Bank. DWS shares jumped 9 per cent to their highest since May.

European payments companies Worldline, Ingenico and Wirecard rose after US fintech group Fidelity National Information Services agreed to buy Worldpay for about US$35 billion.

That deal adds to a bumper few months for acquisitions in the fast-growing sector which analysts say may be far from over.

London's FTSE 100 rose the most among euro-peers with a near 1-per cent gain at the start of a week in which parliament is expected to vote for a third time on Prime Minister's Theresa May's Brexit plan after ruling out a near-term no-deal exit.

Mounting speculation the US Federal Reserve will sound decidedly dovish at its policy meeting this week was also aiding global stock markets.

The European Central Bank changed its own direction on policy this month, pushing out the timing of its first post-crisis rate hike until 2020 at the earliest and offering banks a new round of cheap loans to help revive the euro zone economy.

Basic and resources sector jumped 1.7 per cent, after Vale, the world's top iron ore miner, announced further output cuts, raising worries about tightening supply of the steelmaking ingredient and triggering a rally in Chinese futures.

However technology companies came under pressure as shares of Apple suppliers such as Infineon, AMS and STMicroelectronics fell, tracking their US peers lower after Synaptics Inc said third-quarter earnings would come in at low end of forecast due to softness in China.

Infineon posted its worst day in over two months and was among the biggest losers on Germany's benchmark stock index , which fell 0.25 per cent after three gaining sessions despite the surge in Deutsche Bank. Adidas dropped 2.4 per cent, although volumes were low.

Leoni was the day's big loser, sinking almost 20 per cent to a near nine-year low after the German automotive cable and wiring system specialist abandoned its 2019 profit target.

The Italian bourse climbed almost a per cent, closing at it highest in almost six months, after ratings agency Moody's decided not to downgrade the country.

A rare laggard among banks was Dutch lender ING Groep , whose shares fell 1 per cent after Italy's central bank identified "shortcomings" in its Anti-Money Laundering (AML) processes at its Italian unit. 

REUTERS