Europe: Trade pact lifts European shares while Italy extends slide

[LONDON] European shares rose on Monday as a new US-Mexico-Canada trade pact lifted some of the gloom over global trade, while Italian stocks extended Friday's slide as top EU officials weighed in on the government's budget plans.

There was no shortage of corporate news to drive the markets either, with Ryanair taking a 12.5 per cent dive after a profit warning, Fresenius boosted by a ruling in its favour, and Linde rising on a regulator's green light for its merger with Praxair.

The euro zone's top stock index rose 0.4 per cent while Germany's trade-sensitive DAX climbed 0.8 per cent.

"News overnight of a late agreement between the US and Canada to salvage the Nafta trade agreement should give a boost to global risk appetite at the start of the fourth quarter," wrote Peel Hunt strategist Ian Williams, adding the deal "may offer encouragement that the other global trade disputes can be settled satisfactorily".

Ryanair was the worst performer, down 7.5 per cent after it cut its forecast for full-year profit and said there could be worse to come if recent coordinated strikes across Europe continue to hit traffic and bookings.

The fall in Europe's largest low-cost carrier weighed on the wider sector which fell 0.5 per cent.

Peers Easyjet, Air France-KLM and British Airways owner IAG were down 4.1 per cent, 2.6 per cent and 1.4 per cent respectively.

While the overall market gained, Italian shares were still on tenterhooks in the fallout of the government's decision to increase its deficit target, while Italy's government bond yields climbed higher.

Starting the day as the strongest gainer, the FTSE MIB reversed course to finish down 0.6 per cent with Italian banks extending Friday's fall by another 3.1 per cent.

The vice-president of the European Commission Valdis Dombrovskis said its initial view was that the Italian budget plans break EU rules.

"Tria went there to reassure but intial comments from Moscovici and Dombrovskis are not positive," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.

Euro zone banks also felt the strain, down another 1.2 per cent and the worst-performing sector.

Among gainers, Fresenius shares topped the Stoxx with an 8.3 per cent gain after a Delaware judge ruled the German healthcare group could walk away from its US$4.75 billion deal for US drugmaker Akorn Inc and rejected Akorn's claim that the merger agreement had been breached.

Germany's Linde jumped 6.2 per cent after it received approval for its proposed US$83 billion merger with Praxair from the Chinese antitrust authorities.

French supermarket group Casino inched up 0.1 per cent after it said it had agreed to sell some property assets for 565 million euros (S$897.54 million) to reduce debt levels that have worried investors.

REUTERS