European shares rise, helped by M&A activity

Mon Jan 14, 2013 5:16am EST

* FTSEurofirst 300 up 0.2 percent

* Swatch climbs, buys Harry Winston jewellery arm

* Saint-Gobain up, group scores firm offer for Verallia NA

* TNT Express plunges, UPS says to withdraw bid

By Tricia Wright

LONDON, Jan 14 (Reuters) - European shares rose on Monday, with merger and acquisition news helping them build on gains made since the start of the year as investors awaited another round of corporate earnings reports.

Swiss luxury firm Swatch Group added 3.7 percent, buoyed by news it is buying the luxury jewellery arm of Canada's Harry Winston in a $750 million cash deal to expand into high-end bracelets, rings and necklaces.

Saint-Gobain gained 3.2 percent after it said it was in talks with Ireland's Ardagh Group over a firm bid for the French firm's Verallia North America glass packaging unit.

But European postal service operators were under pressure after United Parcel Service Inc said it would drop its 5.2 billion euro ($7 billion) bid for peer TNT Express on the expectation of a European Commission veto.

Shares in the Dutch delivery firm plunging 41 percent.

The FTSEurofirst 300 was up 0.2 percent at 1,166.11 by 0949 GMT, just shy of a two-year high after rising almost 3 percent during 2013.

The corporate earnings season would likely remain the main driver of market sentiment, Craig Erlam, market strategist at Alpari, said.

"With earnings expectations so low for the fourth quarter, it's difficult to see where any downside is going to come from. As a result, I expect European markets to continue to rally this week," he said.

The banking sector will fall under the spotlight this week, with JPMorgan and Goldman Sachs among firms set to report.

Comments from a top Federal Reserve official also brightened the mood on Monday. Charles Evans said the U.S. economy should grow 2.5 percent in 2013, improving to 3.5 percent growth in 2014, and the unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.

Heavyweight mining stocks rose, led by Eurasian Natural Resources, up 2.5 percent, with traders citing a Credit Suisse recommendation upgrade to "outperform" from "neutral" as the catalyst.

Upbeat broker comment also lifted Cap Gemini. The French IT services group added 3.8 percent, with traders pointing to Goldman Sachs' upgrade to its "Conviction Buy" list in a European technology review.

Goldman removed mid-cap British chip designer Imagination Technologies from the list. Its stock shed 2.8 percent.

British software firm Sage Group, meanwhile, fell 1.7 percent as Barclays cut its rating to "underweight" from "equal weight".

French energy firm EDF added 4.4 percent after it reached a deal with the government over a tax levy shortfall.

The euro zone's blue-chip Euro STOXX 50 rose 13.69 points, or 0.5 percent, to 2,731.48, having hit a fresh five and a half month high in earlier trade on Monday.

"It appears to be breaking out of its trading range for this year... I am positive at the moment; we're targeting the 2,749 area," Barclays Capital's chief European technical strategist Phil Roberts said.

Goldman Sachs equity strategists, meanwhile, have a relative "underweight" position on European equities on a 12-month basis, arguing that European shares may continue to be impacted by the region's sovereign debt crisis. They are "overweight" on equities at a global level over that period.

"We doubt that Europe will keep pace with the Asian markets," Goldman Sachs chief global equity strategist Peter Oppenheimer said at a presentation in London.

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