European Shares Advance on M&A News; Unilever Up
Published: Monday, 27 Sep 2010 | 4:55 AM ET By:
European equities extended the previous session's sharp gains on Monday, with food and beverages shares featuring among the top gainers on news that Unilever is to acquire a U.S. company for $3.7 billion.
The FTSEurofirst 300 index [.FTEU3 1078.3 0.15 (+0.01%)] of top European shares was up after gaining 1.2 percent on Friday.
Consumer goods giant Unilever [ULVR-LN 1837.00 44.00 (+2.45%)] rose 2.8 percent after the company said it agreed to buy United States-based hair care group Alberto Culver[ACV 31.48 --- UNCH (0) ].
In other news, a source said on Monday that China's Bright Food Group would explore the purchase of Britain's United Biscuits, a deal that at roughly $3.2 billion would be the largest ever international purchase by a Chinese company in the food and beverage sector.
The STOXX Europe Food and Beverage index rose 0.8 percent, while Pernod Ricard, Orkla and CSM advanced 0.6 to 2.3 percent.
"We are now seeing a lot of corporate activity. I don't think we would see this unless there was a certain degree of confidence that the outlook was reasonably promising," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"If you look at the overall background, we have got interest rates likely to remain where they are in the major economies for a long period of time, we have got a recovery that is underway and is likely to be sustained, and the underlying tone of some of the newsflow is strong."
On Friday, better-than-feared U.S. macro economic data helped the European stock market snap a three-day losing run.
Figures showed new orders for long-lasting U.S. manufactured goods excluding transportation gained ground last month while business spending rebounded.
Technical Outlook Improves
Technical picture also improved after recent gains in share prices. The Euro STOXX 50 [.STOXX50E 2789.88 -2.87 (-0.1%)], the euro zone's blue chip index, rose to hover above its 200-day moving average of 2,776.09.
The index faces strong resistance at 2,805.95 points, which represents the 61.8 percent Fibonacci retracement of a slide from an April high to a May low, as well as at 2,827.44 points, a six-week high hit last week.
Miners were among the top gainers on hopes that a global economic recovery will boost demand for raw materials.
The STOXX Europe Basic Resources index was up 0.7 percent. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources [EURNF 13.8 --- UNCH (0) ] all rose.
Nestle [NSRGY 53.5 --- UNCH (0) ], the world's biggest food group, was up 0.5 percent. The company is creating a new unit to focus on healthcare nutrition, underlining the group's focus on the profitable health and wellness area.
But AstraZeneca [AZN 52.69 --- UNCH (0) ] fell as its experimental prostate cancer pill zibotentan failed to improve survival in a late-stage clinical trial, dealing a fresh blow to the company's oncology pipeline.
"This news extends a period of poor results for AstraZeneca's oncology franchise with Zactima and Recentin failing to live up to expectations," said Brian White, analyst at Shore Capital.
"Despite consensus forecasts suggesting 2015 sales in excess of $500 million on a non-risk adjusted basis and some excitement (elsewhere) in the investment community about the potential for zibotentan given its novel mechanism, we felt that this was a high risk approach."