Friday, September 13 16:26:09
European shares steadied near 3-1/2-month highs on Friday, with merger and acquisition activity in the healthcare and media sectors underpinning the market, which headed for its second straight week of gains.
German hospital chain Rhoen-Klinikum jumped 11.6 percent in huge volumes to become the best performer on the FTSEurofirst 300 index after saying it will sell most of its hospitals to Fresenius for 3.07 billion euros.
Rhoen-Klinikum's trading volumes were more than 10 times its 90-day daily average on the news, which also boosted Fresenius shares, up 4 percent.
Kabel Deutschland surged 6.2 percent, propelled by news that Vodafone had secured enough shares in the German cable company for its 7.7 billion euro takeover offer to succeed.
"In the current favorable environment, it's easier to convince the acquiring company to pay more so that the shareholders of the companies being taken over are more ready to accept," Ronny Claeys, senior strategist at KBC Asset Management, said.
"There are possibilities of more M&A activities," he said, adding sectors such as telecoms and pharma could see a pick up in merger deals.
At 1454 GMT, the FTSEurofirst 300 index was up 0.1 percent at 1,248.42 points after climbing to as high as 1,250.24 on Thursday, the highest level since May. It is up 10 percent this year and headed for its second straight week of gains.
A wave of recent M&A deals, mostly in the tech, telecom and media sectors has helped support European equities in the past few weeks, fuelling expectations of further takeover deals as the economy recovers.
"Now that companies have cut costs and cleaned up their balance sheets, they are full of cash and ready to gain market share, and given the slow economic growth, the best way to do that is by taking over other companies," Montaigne Capital fund manager Arnaud Scarpaci said.
According to Thomson Reuters Worldscope data, euro zone firms listed on the MSCI EMU have on aggregate about 800 billion euros in cash on their balance sheets.
Kabel Deutschland propelled the European media index , up 0.9 percent, to the top of the sectoral risers' list, but gains were offset by weakness in cyclical sectors such as miners and banks, down 1.4 percent and 0.5 percent respectively, on concerns of a cut in U.S. stimulus.
Investors were reluctant to take strong fresh bets ahead of the U.S. Federal Reserve's policy meeting next week. According to a Reuters poll, the Fed is likely to announce to curb its monthly spending on asset purchases by $10 billion.
The Fed's quantitative easing programme has been a major driver of the global equity rally over the past year, with the FTSEurofirst 300 up 32 percent since June 2012.
A Lipper poll of U.S.-based funds invested in European equities, which include exchange-traded funds' (ETFs) holdings, shows the funds added a net $797 million in the week, an 11th straight week of net inflows from U.S. investors.