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Europe: US tax bill delivers shot in the arm for European shares


[LONDON] European stocks rallied strongly on Monday after the US Senate passed a tax package delivering significant fiscal stimulus, which investors have been anticipating would give extra legs to the bull run in equity markets.

The tax overhaul delivered some relief in early European trading after benchmarks hit multi-week lows on Friday.

Strong gains in the US dollar helped Germany's dollar-exposed DAX shoot up from a two-month low, last up 1.1 per cent. The euro's strengthening has weighed on earnings expectations for stocks across the euro zone this quarter.

Bank stocks, seen as the biggest beneficiaries of tax cuts, led gains, up 0.9 per cent on the day.

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The pan-European STOXX 600 gained 0.7 per cent while euro zone blue chips jumped 0.8 per cent, set for their best gains in five weeks.

Autos stocks, which also have large exposures to the US, shot higher with Fiat Chrysler leading Italy's FTSE MIB, up 3.2 per cent.

Elsewhere dealmaking moved some stocks. Denmark's largest insurer Tryg jumped 3.9 per cent after agreeing to buy unlisted competitor Alka Forsikring.

Italian cable maker Prysmian meanwhile fell 2.9 per cent after agreeing a US$30 per share all-cash deal to buy Kentucky-based rival General Cable.

Chipmaker ams led European gains, up 4 per cent after Barclays raised the stock to 'overweight'.

Peer Dialog Semiconductor however slipped 4.1 per cent after the iPhone supplier said top customer Apple could be working on building its own power-management chips rather than procuring them from the German microchip maker.