AstraZeneca weighs on Europe shares as it rejects Pfizer bid

Mon May 19, 2014 4:09am EDT

* FTSEurofirst 300 down 0.4 pct, FTSE down 0.5 pct

* AstraZeneca falls 14 pct as it rejects "final" Pfizer bid

* Deutsche Bank down 0.9 pct as it unveils cap hike

By Francesco Canepa

LONDON, May 19 (Reuters) - European stocks edged lower on Monday, with British pharma group AstraZeneca weighing after it rejected a takeover bid, while broader sentiment was capped by an uncertain economic picture.

Shares in AstraZeneca fell 14 percent after it rejected a sweetened "final" cash-and-stock offer from Pfizer , leaving it uncertain if the U.S. drugmaker would pull off its plan to create the world's biggest pharmaceuticals group.

The stock had risen nearly 30 percent since mid-April, when speculation about a Pfizer interest first emerged.

"People are getting stopped out of AstraZeneca," Mark Ward, head of execution trading at Sanlam Securities, referring to a situation where an automated sell order is generated after a stock falls below a pre-determined level.

"We've been buying it this morning because we're pretty confident that Pfizer is going to come back with an all-cash offer which AstraZeneca's board might accept."

AstraZeneca's stock knocked 2.3 points off the pan-European FTSEurofirst 300 index, which was down 5 points, or 0.4 percent, at 1,356.51 points at 0746 GMT.

Britain's FTSE was down 0.5 percent while the euro zone blue-chip Euro STOXX 50 was down 0.3 percent at 3,162.41 points.

Weighing on the euro zone index was Deutsche Bank after Germany's largest lender unveiled plans to raise 8 billion euros ($11 billion) in new capital, in its third capital increase since 2010.

Shares in Deutsche Bank, down 0.9 percent, had risen by 7 percent over the previous two years, lagging a 70 percent rally in a broader MSCI index of European banks. Deutsche's stock trades at 57 percent the bank's book value, a 40 percent discount to the sector, Datastream data showed.

"Plenty for both the bulls and bears in this announcement," a sales trader wrote in a comment to clients.

"I think it's worth noting that on a day trade, buyers will look to buy on severe weakness as opposed to sell into strength, but the weight of stock coming to market and dilution worries me that these can trade (lower)."

News that China is tightening its grip on interbank lending to defuse risks in shadow banks capped investor sentiment in Asia overnight.

After disappointing economic data from some key euro zone countries last week, investors were reluctant to push main regional indexes to multi-year highs hit last week in the absence of fresh positive catalysts.

Some expected the European Central Bank to shore up sentiment next month by lowering its interest rates and possibly announcing further stimulus measures, in a move which would further depress bond yields and revive the stock market's attraction.

"It's not going to be a straight-line recovery and people will lose confidence in it at times," Richard Marwood, senior investment manager at AXA Investment Managersnt, said.

"But you've got a safety net (from central banks) and I still think the stock market is a better place to be than the bond market."

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (Reporting By Francesco Canepa; Editing by Toby Chopra)