* FTSEurofirst 300 up 1.4 pct, Euro STOXX 50 up 1.3 pct
* Indexes extend gains after strong euro zone consumer
* AstraZeneca jumps 6.3 pct on M&A talk
* Philips drops 5.5 pct after disappointing earnings
By Francesco Canepa
LONDON, April 22 European shares rose on
Tuesday, setting a key index on course for its biggest daily
gain in nearly two months on the back of mergers and
acquisitions activity in the pharmaceuticals sector and bullish
euro zone consumer confidence data.
The STOXX Europe 600 health care index rose 3.2
percent as AstraZeneca rallied on speculation about a
bid approach from U.S. major Pfizer, while a deal to
swap assets boosted GlaxoSmithKline and Novartis
The global pharmaceuticals sector has seen a flurry of
deal-making recently and analysts expected M&A activity to be a
key driver for the shares in the coming months.
"Any stock in the industry is a target apart from the ones
that are too big (such as Pfizer and Novartis)," said Lars
Hevreng, an analyst at SEB Equities.
"It's simply a combination of very low financing costs and a
strong-balance-sheet industry on one hand, and on the other hand
consolidating companies that are still fairly similar to each
Shares in AstraZeneca surged 6.3 percent in London - making
them the top gainers among European blue chips - after Britain's
Sunday Times newspaper reported that Pfizer had approached its
British rival to propose a 60 billion pound ($101 billion)
Major European stock markets had been closed since Thursday
for the Easter holiday.
GlaxoSmithKline jumped 5.6 percent after it agreed to sell
its oncology products to Novartis for $14.5 billion, while
buying the Swiss firm's vaccines, excluding flu. Novartis'
shares were up 2.5 percent.
The healthcare index is up around 6 percent so far this
year, outpacing the broader market. It is trading at 15.9 times
its expected earnings for the next 12 months, which is at a
premium to its 10-year average price-to-earnings multiple,
Datastream data showed.
The high valuations, however, were unlikely to discourage
M&A activity, according to James Griffin, portfolio manager of
the Fidelity MoneyBuilder Growth Fund.
"Any such deal between Pfizer and Astra, like the
transaction between Glaxo and Novartis, would demonstrate how
corporate buyers are willing to take a different perspective on
valuation, taking a more fundamental and long-term view,"
Griffin said in a note.
At 1432 GMT, the FTSEurofirst 300 index of top
European shares was up 1.4 percent at 1,347.29 points, setting
it on course for its biggest daily gain since March 4.
The index extended gains in the afternoon after European
Commission data showed euro zone consumer confidence rose more
than expected in April.
The FTSEurofirst has gained more than 3 percent since
mid-April, and is now just 0.5 percent off a near six-year high
hit early this month.
The euro zone's blue-chip Euro STOXX 50 index
added 1.3 percent to 3,198.14 points.
PHILIPS IN THE DARK
Shares in Philips tumbled 5.5 percent after the healthcare,
lighting and consumer appliances group reported a
bigger-than-expected fall in quarterly operating profit.
It warned 2014 would be challenging, blaming unfavourable
exchange rates and slowing demand for medical equipment in China
The European earnings season has yet to start in earnest,
with sales numbers out from just 5 percent of the STOXX Europe
600 index companies due to report. Half of those that
have reported so far have missed analyst estimates, Thomson
Reuters StarMine data showed.
"Behind the M&A noise, the earnings picture in Europe has
not been very rosy so far," said Alexandre Baradez, chief market
analyst at IG France.
"The market needs a real positive catalyst, such as a good
string of corporate results or pro-active measures from the
European Central Bank, otherwise this month's pullback will soon
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by Catherine Evans and Susan Fenton)