European stocks advanced this week, pushing the Dow Jones STOXX 600 Index to its biggest gain since July, as investors speculated mergers will increase and evidence mounted that the economy is recovering from recession.
Cadbury PLC, the world’s largest confectioner, jumped 37 percent after rejecting a US$16 billion takeover offer from Kraft Foods Inc. BHP Billiton Ltd climbed 8.1 percent as metal prices rose and reports showed industrial production and investment growth in China accelerated. Renault SA surged 10 percent as chief executive officer Carlos Ghosn said the worst of the financial crisis was over.
The STOXX 600 added 3.4 percent to 241.74 this past week, extending an 11-month high. The measure has soared 53 percent since March 9 as companies from Goldman Sachs Group Inc to L’Oreal SA reported better-than-estimated results and the German and French economies unexpectedly grew. The rally has driven the STOXX 600’s valuation to 46.7 times reported company earnings, the highest level since 2003, according to Bloomberg data.
“The upward trend is still intact,” said Daniel Knuchel, who oversees about US$3 billion as chief investment officer at AAM Privatbank AG in Zurich. “M&A activity is a positive factor as it shows that companies are seeing value again. It spurs a certain confidence if you see large transactions like Kraft’s bid for Cadbury.”
European investor confidence increased for a second month in September as the euro-area economy starts to recover, according to data from the Limburg, Germany-based Sentix research institute.
National benchmark indexes increased in all 18 western European markets, except Iceland. The UK’s FTSE 100 advanced 3.3 percent and France’s CAC 40 rose 3.8 percent. Germany’s DAX climbed 4.5 percent as Commerzbank AG rallied.
The VSTOXX Index, which gauges the cost of insurance against declines on the Euro STOXX 50, fell 8.5 percent to the lowest level in a year.
STMicroelectronics NV, Europe’s biggest semiconductor maker, rose 6.5 percent and Infineon Technologies AG, the second-largest, climbed 7.2 percent after Texas Instruments Inc, the second-biggest US chipmaker, increased its sales and earnings forecasts and said demand for so-called analog chips is beginning to recover.
RSS