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Europe: Stocks end at 11-month high on deals, Italy optimism

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[LONDON] European shares rose slightly on Tuesday, holding near their highest levels since January, helped by a busy year-end for corporate deal making and more signs that Italy is making progress on stabilising its wobbly banking sector.

Europe's STOXX 600 rose 0.5 per cent to its highest since Jan 4 with financials providing the biggest boost to the index. Among national benchmarks, Italy's FTSE MIB was the best performer, up 1.5 per cent to its highest since end January.

A recovery in corporate mergers and acquisitions activity helped underpin the ongoing year-end rally, with Mediaset surging another 23 per cent in heavy volumes on Vivendi plans to raise its stake in the Italian broadcaster to 30 per cent.

Mediaset, which saw more than 10 per cent of its capital traded on Tuesday, has doubled in share price value since late November and is now positive on the year.

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Corporate deal making, which had a record year in 2015, suffered earlier this year from uncertainty surrounding Britain's vote to exit the European Union, the US presidential elections and Italy's efforts to stabilise its banking system.

"It could be that a lot of firms worried about Brexit and Trump earlier this year have realised that nothing has really changed yet, markets are up and want to get deals done," said Artur Baluszynski, head of research at investment firm Henderson Rowe.

Elsewhere, Lloyds Banking Group rose 2.2 per cent after saying it would buy MBNA from Bank of America for US$2.4 billion, a move that would make the British lender the second-biggest credit card provider in the country.

Euronext shares rose 2.5 per cent after Deutsche Boerse and London Stock Exchange said they were in talks to offload LCH.Clearnet to the pan-European exchange operator ahead of their planned merger.

Italy's banking index rose 2.3 per cent after the government decided to seek parliamentary approval to borrow 20 billion euros to underwrite the stability of its banks, starting with a likely bail-out of No. 3 lender, Monte dei Paschi di Siena, as early as this week.

The materials sector, particularly metals mining shares, underperformed and some investors locked in profits following the stellar run this quarter and as concerns about China resurfaced.

Top STOXX loser was Actelion, which fell 5.6 per cent after UBS questioned the rationale of a potential takeover of the Swiss drugmaker from French rival Sanofi while worries appeared to be growing that a deal may not be as close as reports suggested last week. Sanofi rose 1 per cent.

Immofinanz fell 5.5 per cent after it reported a first-half net loss due to difficult market conditions in Russia, which also prompted the Austrian property firm to postpone a merger decision with CA IMMO to 2018.