European stocks extend rallyComment on this story
Paris - European shares rose in early trade on Tuesday as mergers and acquisitions activity in the pharma sector helped the market extend last week's gains and eclipse disappointing results from Dutch conglomerate Philips.
Shares in the healthcare, lighting and consumer appliances group tumbled 6.7 percent after reporting a bigger-than-expected fall in quarterly operating profit and warning of a challenging 2014, blaming unfavourable exchange rates and slowing demand for medical equipment in China and Russia.
“Behind the M&A noise, the earnings picture in Europe has not been very rosy so far,” said Alexandre Baradez, chief market analyst at IG France.
“The market needs a real positive catalyst, such as a good string of corporate results or pro-active measures from the European Central Bank, otherwise this month's pull-back will soon resume.”
At 09:43 SA time, the FTSEurofirst 300 index of top European shares was up 0.9 percent at 1,340.18 points.
The index has gained about 3 percent since mid-April, but is still down about 1 percent from a near six-year high hit in early April.
The euro zone's blue-chip Euro STOXX 50 index added 0.7 percent, to 3,175.96 points.
Shares in AstraZeneca's surged 7.4 percent - by far the top gainers among European blue chips - after Britain's Sunday Times reported that US pharmaceutical major Pfizer has approached its British rival to propose a 60 billion pound ($101 billion) takeover.
“(An) AstraZeneca acquisition would fit Pfizer's key strategic goals for immunotherapy and autoimmune disease,” Citigroup analysts wrote in a note.
“Most importantly, we believe that Pfizer has recognised that the commercial potential for cancer immunotherapy is materially higher than market estimates.”
Also in the pharma sector, Swiss drugmaker Novartis rose 2.5 percent after unveiling plans to transform its business by exchanging certain assets with GlaxoSmithKline and divesting its animal health business to Eli Lilly in deals worth billions of dollars.
GlaxoSmithKline's shares were up 4.3 percent.
The STOXX Europe 600 health care index was up 2.5 percent, with other majors such as Sanofi up 1.8 percent.
The sector index is up 5.5 percent so far this year, outpacing the broad market, with the FTSEurofirst 300 up 1.7 percent in 2014. - Reuters