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Syngenta, defence stocks help European stocks steady at 16-month peak
[MILAN] European shares inched up on Wednesday, steadying around 16 month highs, helped by gains in Syngenta and a rally in defence stocks on investor concerns about lingering geopolitical risks.
The pan-European Stoxx 600 index rose 0.2 per cent but trading was choppy just a few days ahead a holiday break, while Germany's DAX added 0.1 per cent and France's CAC was flat.
Syngenta was the biggest single-stock contributor to gains in the Stoxx index, up 2.2 per cent, after ChemChina's US$43 billion planned takeover of the Swiss pesticides and seeds group received approval from Chinese regulators.
Europe's aerospace and defence stocks index outperformed, up 0.9 per cent to a fresh 20 month highs.
"Every time macro political tensions arise, the sector gets a boost," said Federico Polese, fund manager at Simplify Partners, noting however that defence spending programs are long term and do not change when the political climate heats up. "Investors are pricing in expectations of a rise to defence spending in the US," he added.
Auto stocks also provided support but their sectoral index pared some gains to end up 0.3 per cent.
French auto parts manufacturer Faurecia gained 1 per cent after it posted first-quarter sales up 10 per cent to 4.2 billion euros (S$6.3 billion). Deutsche Bank said strong results over consecutive semesters should feed through into a valuation which is one of the lowest in the sector.
German luxury carmaker Daimler gained 0.3 per cent after it said first-quarter profits jumped 87 per cent on strong Mercedes sales.
Dialog Semiconductor was the top European faller for a second day, down 1.6 per cent. It fell 14 per cent on Tuesday after an analyst report said its biggest client Apple could be seeking to ditch its power management supply (PMIC) in favour of creating the parts itself.
"Apple PMIC insourcing fears appear overdone for Dialog," said Deutsche Bank, reiterating a 'hold' rating on the stock.
Britain's biggest retailer Tesco fell 5.7 per cent as analysts pointed to a few negatives in its full-year results, including slowdown in UK and Ireland margins.