Royal Dutch Shell Plc  .com Rotating Header Image Europe up on merger activity

POSTED: 1841 GMT (0241 HKT), April 30, 2007

LONDON, England (Reuters) — European shares rose on Monday on a fresh wave of merger activity, including a proposed tie-up between Germany’s Deutsche Boerse and U.S. equity options market International Securities Exchange.

Cable & Wireless Plc — one of the top gainers among UK stocks — rose 4 percent although the British telecoms group played down reports it was considering a break-up, saying talk it was looking to spin off its businesses was premature. Oil stocks, including index heavyweights BP and Royal Dutch Shell, were some of the biggest percentage gainers as crude futures held just shy of $68 a barrel after rising 3.0 percent last week.

BP shares gained 0.7 percent, while Shell rose 0.8 percent, even with a 0.8 percent decline in London Brent crude futures, which held just below $68 a barrel.

The pan-European FTSEurofirst 300 index closed 0.16 percent higher at 1,570.18 points.

The index has gained 3.6 percent in April, making this its best month since Sept. 2006. The FTSEurofirst 300 has only posted two monthly declines in the last six months and is up almost 6 percent for the year to date.

“Strong liquidity and M&A are bullish factors for the market,” said Teun Draaisma, an equity strategist at Morgan Stanley.

Europe has emerged as the world’s biggest market for mergers and acquisitions so far in 2007, with deals valued at nearly $862 billion involving European targets, data from research firm Dealogic showed on Friday.

But the number for 2007 includes two rival bids for Dutch bank ABN AMRO.

Tempering gains somewhat on Monday, were soft data on business activity in the auto-intensive U.S. Midwest region in April, as well as benign inflation figures that reinforced the view that the U.S. economy is slowing.

Deutsche Boerse said it plans to offer $2.8 billion to buy the New York-based ISE, the largest U.S. equity options market.

Deutsche Boerse’s shares rallied 1.4 percent to 172.55 euros, making it the third-largest gainer on Frankfurt’s DAX.

The DAX ended 0.4 percent higher, while London’s FTSE 100 index rose 0.48 percent, aided by Cable and Wireless and BP, among others.

Paris’ CAC 40 gained 0.5 percent following a series of broker upgrades to French construction and materials companies.

French utility Suez and construction groups Lafarge and Saint Gobain rose after positive brokerage comments.

Analysts said equity markets looked attractive in the medium term, although there could be some blips in the near future.

“Our bullish target for Q2, for mid-year have been reached already in April in some cases,” said Gerhard Schwarz, head of global equity strategy at HVB.

“That clearly shows that there has been a very strong run and this over the shorter term probably invites some profit taking, markets are a little bit overbought,” he said, adding that there was “underlying strength” in equities.

Volumes were relatively thin ahead of a holiday in many markets in Europe on Tuesday.

Shares of Telecom Italia and Pirelli fell after Pirelli sold control of Italy’s largest phone group to a group of Italian investors and Spain’s Telefonica at a premium to market prices — but no offer to the public.

Telecom Italia shares shed 2.3 percent, while Pirelli dropped over 1.0 percent, reversing earlier gains.

Telefonica shares dropped 0.4 percent.

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