European shares on Friday posted their second week of gains with personal and household goods stocks led by a leap in Unilever PLC’s shares after a takeover bid, though banking and resources stocks saw a pull-back.
The pan-European STOXX 600 index was flat in percentage terms at its close, but ended near a 13-month high reached on Wednesday. The index rose 0.8 percent from last week’s 367.39 points to 370.22 points.
The rally has been fueled by strong earnings updates, a pick up in merger and acquisition (M&A) activity, with cyclical stocks, such as miners and banks, lifted by solid economic data.
A prime example of M&A activity was a surprise US$143 billion takeover bid from US food company Kraft Heinz Co for household goods firm Unilever.
Unilever rejected the US$50 per share offer, saying that it was too low.
Unilever’s London-listed shares jumped 13.4 percent, hitting a record high and posting their best day in 30 years, and the broader household and personal goods sector rose 2.8 percent to a new high.
However, analysts said they were not convinced.
“The approach by Kraft-Heinz is a total surprise. Unilever has double the revenue of Kraft for instance,” AFS Group analyst Jauke de Jong said.
“Unilever would be on strong grounds to state that the offer materially undervalues the company, with recent large-cap consumer staples transactions having been conducted on higher multiples,” analysts at Barclays PLC said in a note, citing the recent US$16.6 billion tie-up between Reckitt Benckiser Group PLC and Mead Johnson Nutrition Co as well as Anheuser-Busch InBev NV’s acquisition of SABMiller PLC.
Results also drove share prices, with Essentra PLC the top STOXX 600 gainer, up about 15 percent after reporting earnings.
Though the supplier of specialty plastic and packaging components saw a 26 percent fall in full-year profit, analysts at Jefferies Group LLC said that absence of any “bad news” was positive.
However, commodities and bank-related stocks weighed, with STOXX bank index down 0.9 percent as investors booked profits for a second day after the index hit a three-week high on Wednesday, helped by growing expectations of a rate hike next month in the US.
Standard Chartered PLC, Bank of Ireland PLC and Credit Agricole SA fell between 2.7 and 4.4 percent.
Miners were also weaker, down 1.1 percent, pulling back after climbing earlier this week to their highest level in more than two years.
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