European shares buoyed by Vodafone bid talk

Tue Apr 2, 2013 12:53pm EDT

* FTSEurofirst 300 up 1.3 percent

* Vodafone gains 2.9 percent on renewed M&A talk

* Euro STOXX 50 breaks above resistance level at 2,650 pts

By Tricia Wright

LONDON, April 2 (Reuters) - European shares rose on Tuesday, boosted by Vodafone on rumours of a multi-billion-pound break-up bid for the UK telecoms group, as merger & acquisition activity in the region picks up.

Vodafone advanced 2.9 percent after a report that said U.S. joint venture partner Verizon Communications and AT&T had been working together on a joint bid for the British group. Vodafone declined to comment.

Trading volume in Vodafone was robust - at nearly three times its 90-day daily average - as was that in Swedish telecoms group Tele2 and Dutch coffee and tea firm D.E Master Blenders, both of which have been involved in recent multi-billion dollar M&A activity.

"If Verizon and AT&T came in with a break-up bid for Vodafone, that would be a classic example of exactly the kind of (cross-border M&A) thesis which we think is coming over the (next) months," Exane BNP Paribas's head of equity strategy, Ian Richards, said.

"Anything such as this which helps investors really focus on the underlying value appeal and what something is intrinsically worth, I think, is clearly good news for share prices."

Expectations of consolidation also aided other big telecom stocks, with Telecom Italia up 2.8 percent and France Telecom up 1.6 percent.

The FTSEurofirst 300 closed up 14.87 points, or 1.3 percent, at 1,203.79, with Vodafone accounting for nearly 1 point of the index's rise.

The index has nearly recouped all of its losses seen since mid-March when Cyprus's bailout plan sparked fears of a bank run in the euro zone's most indebted countries.

The euro zone's blue chip Euro STOXX 50 index advanced 2.1 percent to 2,679.80, having on Tuesday pierced the 2,650 points level that had been seen as a key resistance level by traders.

BET ON EQUITIES

European high-net worth individuals were betting stocks will outperform all other asset classes this year and planned to increase their equity positions, according to a JPMorgan Private Bank survey.

Around 60 percent of respondents to the poll, which was conducted before the Cypriot crisis, said equities will outperform, with the remaining 40 percent split between private equity (19 percent), commodities (10 percent) and hedge funds (9 percent).

Continued stimulus measures from world central banks have helped equity markets rise in 2013, with the FTSEurofirst 300 up more than 6 percent, in spite of a revival of concerns surrounding the euro zone debt situation.

Investors have, however, been adopting a more cautious stance, opting for sectors more suited to a low growth environment such as food & beverages and healthcare , which have spearheaded the rise seen this year.

Peter Sleep at Seven Investment Management, which is "overweight" European markets, has been picking up financials, viewing defensive sectors as expensive.

Seven Investment Management has 5 billion pounds ($7.62 billion) of assets under management.

Financials are trading on a 12-month forward price/earnings ratio of 9.2 times, according to data from Thomson Reuters Starmine, against the so-called defensive consumer staples and healthcare sectors on 16 times and 13.4 times respectively.