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Europe: Paper stocks, autos drive shares higher

[LONDON] European shares bounced off six-month lows on Tuesday as the focus shifted from politics to dealmaking and earnings, with paper and packaging stocks soaring after Smurfit Kappa rejected a bid approach.

Telecom Italia jumped 5.9 per cent after activist investor Elliott confirmed it had built a stake in a bid to improve governance and strategy at the company.

The move could challenge the way top shareholder Vivendi is managing the company.

The pan-European Stoxx 600 index ended up 0.1 per cent, coming off earlier highs following a late drop on Wall Street, while Italy's benchmark recouped all of its losses from the previous session, up 1.8 per cent, as concerns over political uncertainty following an inconclusive election result eased.

"Italy is going to be so ... tied up for months that in a way it's almost a blessing because there will not be any ability to do anything unconventional. In a way that is quite comforting for the market," Ken Odeluga, market analyst at City Index said.

"(Italy seems) to have a knack for pulling out a political solution which the markets can live with and that's happened time and time again."

Fiat Chrysler rose 5.7 per cent following a source-based Reuters report saying the Italian-American carmaker was looking to spin off auto-parts business Magneti Marelli to its shareholders.

German autos Volkswagen, Daimler and BMW - hit earlier this week by concerns over a trade war after US President Donald Trump proposed imposing tariffs on steel and aluminium - also rose.

Those worries have dissipated slightly as Mr Trump faces a growing pushback from political and diplomatic allies as well as US companies.

Their gains helped European autos rise 1.2 per cent.

Paper and packaging maker Smurfit Kappa jumped 18 per cent after rejecting an approach from International Paper . Peers DS Smith and Mondi rose 5.6 and 2.3 per cent respectively.

"With a coordinated global fight against the use of plastics, the sector could well be ripe for consolidation," said Mike van Dulken, head of research at Accendo Markets.

A number of stocks sustained heavy losses after giving earnings updates.

Just Eat slumped 12.6 per cent after saying that a planned increase in spending in 2018 would hit core earnings.

Aggreko, a temporary power provider, fell 3.9 per cent after reporting an 11.8 per cent fall in full-year profit. Likewise Swiss security firm Dormakaba fell 5.8 per cent after its half year results, in which it forecast slower organic sales growth.