M&A boost helps European shares extend winning run
* FTSEurofirst 300 closes up 0.4 percent * FTSEurofirst, STOXX 600 up 10 months in a row * Calm reopening of Cyprus banks fuels rally * D.E Master Blenders soars on 6.4-bln-euro bid * European indexes closed Friday & Monday for Easter By David Brett LONDON, March 28 (Reuters) - European shares extended their run of month-on-month gains on Thursday, led by takeover target D.E. Master Blenders, as central bank support continued to temper concerns about euro zone stability. A relatively calm reopening of banks in Cyprus after their closure during the country's recent bailout negotiations also helped the FTSEurofirst 300 close up 0.4 percent at 1,188.92. The broader STOXX Europe 600, meanwhile, rose 0.5 percent to 293.78. Both indexes ended higher in March to ensure a 10th successive month of gains. "This market is driven by investment flows, which are totally favourable to equities at the moment, boosted in part by central bank liquidity," said Xavier Lespinas, head of equities at SwissLife Banque Privée, which has 3.2 billion euros ($4.1 billion euros) in assets under management. "In this context, investors only see the positive catalysts and ignore the bad news ... Beyond the Cypriot crisis, expectations of a sustained recovery in global growth is what's going to support stocks, including European stocks, in the months ahead." Robust retail and labour market figures out of Germany, as well as a higher revision of U.S. fourth quarter GDP growth, helped support that view. While the banks enjoyed a post-Cypriot relief rally, there were signs the current leg of the broader market rally was beginning to wane with indexes at multi-year highs. Investors dipping into the market at the end of the quarter delved into the more defensive plays - firms that provide goods and services for which demand tends not to be impacted as much by economic turmoil. Leading gainers across the FTSEurofirst 300 in heavy volume was Dutch coffee and tea firm D.E Master Blenders 1753 , up 25 percent, after it said it had received a bid proposal from its leading shareholder valued at 6.4 billion euros ($8.18 billion). Analysts and traders said JAB could sell part of its stake in London-based Reckitt Benckiser Group to fund the takeover. Reckitt shares fell 1.4 percent. MOUNTING CAUTION The rally in European shares has disguised a more cautious approach from investors in March. The bailout of Cyprus, and in particular its tax on depositors has raised uncertainty for investors with the market already perched at multi-year highs. A Reuters asset allocation poll showed global investors grew more cautious this month, reacting to the crisis in Cyprus by adding to safe-haven bond positions. "Both the details and implementation of the Cypriot bailout pose a downside risk to the tentative signs of economic stabilisation in the euro area," Credit Suisse said in a note. "Typically ineffective policy implementation - leading to a week of acute uncertainty - is likely to have dealt another blow to business confidence across the euro area," it said. While the STOXX 600 continued its run of month-on-month gains the sector breakdown over the past month shows investors growing slightly more cautious. In the last 30 days basic resources - the most cyclical of sectors on the index - have fallen nearly 7 percent, while euro zone banks have tumbled almost 11 percent. "In simple terms, earnings remain under pressure, driving downgrades, and there is a growing realism about the true risks banks continue to face increasing the cost of equity," Nick Anderson, analyst at Berenberg Bank, said in a note. "The palliative of higher dividends (or merely promises) had no lasting impact ... We reiterate our structural and short-term bear cases and see further downside," he said. Defensive sectors have been the major driver of gains over the last month, led by telecoms, healthcare firms , food and beverages and consumer staples , all up between 5 and 6 percent.
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