‘M&A fever’ gives flagging European stock market a boost

Series of big deals improves sentiment in health care and media sectors

European stocks rose today as a flurry of big mergers and acquisitions deals boosted sentiment and helped the market bounce back after a two-session dip.

Shares in Irish drugmaker Elan jumped 8.3 per cent after US peer Perrigo agreed to buy the firm for $8.6 billion (€6.5 billion), sparking a rally in health care stocks, with Shire up 2.1 per cent and AstraZeneca up 1.2 per cent.

Media shares also surged, boosted by a merger plan between Publicis and Omnicom unveiled over the weekend, in a deal worth $35.1 billion.

France's Havas soared 5.7 per cent and UK's WPP added 1.7 per cent. Publicis shares were halted.

At 8.02am GMT, the FTSEurofirst 300 index of top European shares was up 0.4 per cent at 1,209.40 points, after losing about 0.8 per cent in two sessions. The benchmark index has risen 9 per cent since late June.

Also among the biggest gainers today, France's Essilor , an ophthalmic optics company, rose 4.1 per cent after buying a 51 per cent stake in photochromic lens unit Transitions Optical from PPG Industries Inc for $1.73 billion.

The media and health care sectors have outperformed the market this year, with the STOXX Europe 600 media index up 17 percent and the STOXX Europe 600 health care index up 14.4 per cent, while the FTSEurofirst 300 is up 6.9 per cent.

"These big M&A deals are a big boost for the market, although the buzz is usually short-lived, so I remain relatively cautious at this point," said Philippe de Vandiere, analyst at Altedia Investment Consulting, in Paris.

“The market has risen quite a lot already and even though we didn’t really have nasty surprises in earnings, there’s no big catalyst seen ahead, and we see investors turning more defensive.”

On the earnings front, French food group Danone gained 3.1 per cent after saying sales growth accelerated in the second quarter, and keeping its full-year 2013 profit and sales outlook.

Siemens rose 1.5 per cent. The German engineering conglomerate said its supervisory board will decide on the early departure of its chief executive on July 31st.

Around Europe, UK’s FTSE 100 index was up 0.6 per cent, Germany’s DAX index up 0.8 per cent, and France’s CAC 40 up 0.5 per cent. The euro zone’s blue-chip Euro STOXX 50 index was up 0.3 per cent at 2,748.96.

“I’m quite positive, the market goes up slowly with some consolidation moves happening during the session,” TradingSat analyst Alexandre Tixier said.

“Trading volumes remain brisk, which is a sign of strong buying appetite at this point. Our exposure to equities is at 80 percent right now.”