European equities set new highs; leisure shares help

Tue May 27, 2014 12:45pm EDT

* FTSEurofirst 300 index closes 0.2 pct higher

* Intercontinental Hotel Group gains on M&A talk

* ARM advances on positive broker note

By Atul Prakash

LONDON, May 27 (Reuters) - European shares rose to multi-year highs on Tuesday, bolstered by U.S. economic data, mergers and acquisitions talk and expectations of more policy easing by the European Central Bank.

New economic numbers showed orders for long-lasting U.S. manufactured goods unexpectedly rose in April, home prices advanced more than expected in March and consumer confidence rose to near its highest since 2008.

In addition, on Monday ECB chief Mario Draghi suggested once again that the central bank will cut euro zone interest rates next week. Other policymakers drove home the message on Tuesday.

Acquisition talks also helped the market. The STOXX Europe 600 Travel and Leisure index closed up 1.2 percent after climbing to its highest since 2007, as Intercontinental Hotel Group gained on media reports of interest from an unidentified bidder in the United States.

Intercontinental Hotel, or IHG, rose 3.4 percent to feature among the top performers on the FTSEurofirst 300 index. The index closed 0.2 percent higher at 1,378.82 points after climbing to its highest since early 2008. In the United States, the S&P 500 index hit a record high.

Sky News, citing unidentified sources, said the hotel group had rejected a 6 billion-pound ($10.1 billion) takeover offer from a U.S. bidder on the grounds it was too low. An IHG spokeswoman declined to comment.

Credit Suisse said in a note that a potential deal could generate savings of about $50 million annually and there could be benefits from an altered tax domicile.

French peer Accor, Europe's largest hotel group, gained 1.3 percent after saying on Tuesday it had agreed to buy the assets of 97 hotels for about 900 million euros, in a move the company said would boost earnings.

"We are going to have a sense of normality in 2014 after the financial crisis, when it was more about defending the balance sheet," said Lorne Baring, managing director of B Capital Wealth Management. "We expect more M&As and IPOs and that would be a bullish indicator for the rest of the year.

"The European stock market's outlook looks positive as there is some momentum and the European election has passed without any great surprise. Valuations are still relatively attractive and dividend yields are quite good."

Among other sharp movers, chip designer ARM rose 4 percent to 917 pence. Traders attributed the move to Numis Securities' increasing its price target to 920 pence from 880 pence after an upbeat presentation by the company at a briefing for investors.

The reopening of British markets after a holiday on Monday helped support stocks across the continent. The FTSE 100 rose 0.4 percent, while Germany's DAX rose 0.5 percent after setting a new record high for a second day in a row.

On Monday, the DAX climbed to record high and Italy's FTSE MIB rose 3.6 percent as strong showings by pro-European forces in Germany and Italy helped balance Eurosceptic gains in France, Britain and Greece. The CAC index ended 0.1 percent higher on Tuesday.

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

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

Today's European research round-up (Additional reporting by Alistair Smout; Editing by Larry King)

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