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Europe Stocks Rise as Italy Banks Surge on Renzi Victory

By Corinne Gretler
May 26, 2014 12:07 PM EDT
Mario Draghi, president of the European Central Bank.
Photographer: Jasper Juinen/Bloomberg
Mario Draghi, president of the European Central Bank.

European stocks rose to their highest level since January 2008 as Italian banks surged after Prime Minister Matteo Renzi’s party beat a populist challenger in European Parliament elections.

A gauge of European banks posted the second-best performance on the Stoxx 600, with Italian lenders including UniCredit SpA leading gains. Atos climbed the most since November 2011 after the French computer-services supplier offered to buy rival Bull for about 620 million euros ($845 million). Getinge AB sank 10 percent as the Swedish maker of hospital equipment postponed its investor day because of talks with the U.S. Food and Drug Administration.

The Stoxx Europe 600 Index added 0.6 percent to 343.69 at the close of trading, for a fourth day of gains. The benchmark gauge has risen 8.2 percent from this year’s low on February 4 amid increased mergers-and-acquisitions activity and as ECB President Mario Draghi said policy makers are ready to ease monetary policy if necessary. U.K. markets were closed for a holiday today.

“Renzi being confirmed has increased confidence to play Italian assets ahead of the ECB meeting,” said Benedict Goette, chief executive officer of Compass Capital AG in Zurich, where he helps oversee about $790 million. “European stocks are pushing higher on the back of investors’ anticipation that the ECB will have to announce stimulus measures at their June 5 meeting. We believe this market strength might well continue into early June.”

Weekly Gains

The benchmark index’s advance last week capped its longest streak of weekly gains since November, as a measure of euro-area confidence increased more than forecast, and China and the U.S. reported better-than-estimated manufacturing data.

National benchmark indexes climbed in 15 of the 17 western-European markets open today. France’s CAC 40 added 0.8 percent and Germany’s DAX rose 1.3 percent.

The volume of shares changing hands in Stoxx 600-listed companies was 55 percent lower today than the 30-day average, according to data compiled by Bloomberg.

Renzi’s Democratic Party, or PD, won 41 percent of the vote in Italy, nearly double the 21 percent registered by Beppe Grillo’s euro-skeptic Five Star Movement, according to the Interior Ministry. The PD’s 41 percent was the highest for a single party since the now-defunct Christian Democrats took a point more in the 1958 parliamentary election.

Protest parties across Europe gained votes in elections to the EU’s Parliament. The anti-establishment wave hit hardest in France, Greece and the U.K., undermining the leaders of those countries and making it more difficult to steer the EU.

ECB Forum

Draghi signaled policy makers are ready to take action in June should they see low inflation becoming entrenched. Speaking at the ECB Forum in Sintra, Portugal, he said the key issue for the ECB right now is the timing of any action.

Officials have said they’re working on a package of possible measures for the June 5 policy meeting, including interest-rate cuts and liquidity injections, while holding out the prospect of quantitative easing as a more powerful option.

Banca Popolare dell’Emilia Romagna SC rallied 9.2 percent to 8 euros, while UniCredit added 4.8 percent to 6.31 euros. Intesa Sanpaolo SpA advanced 4.2 percent to 2.41 euros. Italy’s benchmark FTSE MIB Index jumped 3.6 percent, for its largest gain since March 4.

Atos (ATO) climbed 6.2 percent to 64.24 euros. The French company offered 4.90 euros per share in cash, or 22 percent more than Bull’s closing price in Paris on May 23. Atos said the deal would add more than 10 percent to its earnings per share and bring 80 million euros of annual cost savings within 24 months of integration. Bull surged 22 percent to 4.89 euros, its biggest advance since December 2006.

Commerzbank Gains

Commerzbank AG added 3 percent to 11.80 euros. Der Spiegel reported yesterday that Germany, which currently holds 17 percent of the country’s second-largest lender, will keep its stake until at least 2016, after having rejected potential buyers. The newspaper cited unidentified people in the finance ministry.

Daimler AG gained 2.2 percent to 69.61 euros. Les Echos reported that a new vehicle under the Smart brand is among projects being studied by Renault SA, Nissan Motor Co. and Daimler. The newspaper didn’t say where it got the information. Renault added 1.4 percent to 69.94 euros.

Getinge slid 10 percent to 170.80 kronor. The investor day, which was scheduled for tomorrow, has been delayed because of recent communications with the FDA, the company said in a statement late yesterday.

Chief Executive Officer Johan Malmquist said today that the discussions could result in fines. The company has the financial ability to handle potential penalties, he added. The FDA talks could last for months and the investor day will not be held until after summer, Malmquist said in a conference call.

AstraZeneca Drops

AstraZeneca Plc fell 2.1 percent to 474.20 kronor in Stockholm as Pfizer Inc. (PFE) said it had abandoned its effort to buy the U.K. drugmaker for 69.4 billion pounds ($117 billion). The offer represented full value for AstraZeneca, the New York-based company said in a statement today.

Under U.K. takeover rules, Pfizer had until 5 p.m. London time today to make a firm offer. The two drugmakers face a cooling off period of at least three months before talks can restart.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Alan Soughley, Srinivasan Sivabalan

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