European shares advance on M&A news; Unilever up

European shares advance on M&A news; Unilever up

London: 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 US company for $3.7 billion.

By 1:22pm, the FTSEurofirst 300 index of top European shares was up 0.4% at 1,082.65 points after gaining 1.2% on Friday.

Consumer goods giant Unilever rose 2.8% after the company said it agreed to buy United States-based hair care group Alberto Culver Co.

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%, while Pernod Ricard, Orkla and CSM advanced 0.6 to 2.3%.

“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 US macro economic data helped the European stock market snap a three-day losing run. Figures showed new orders for long-lasting US manufactured goods excluding transportation gained ground last month while business spending rebounded.

Technical picture also improved after recent gains in share prices. The Euro STOXX 50, the euro zone’s blue chip index, rose 0.4% to 2,803.81 points 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% 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%.

BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 0.2 to 1%.

Nestle, the world’s biggest food group, was up 0.5%. 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 fell 0.8% 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."