* FTSEurofirst 300 up 1.3 pct, Euro STOXX 50 up 1.4 pct
* Indexes extend gains after strong consumer confidence data
* Pharma boosted by AstraZeneca bid talk, GSK-Novartis swap
* Philips drops 4.7 pct after disappointing earnings
By Francesco Canepa
LONDON, April 22 European shares rose on
Tuesday, boosted by mergers and acquisitions activity in the
pharmaceuticals sector and by bullish euro zone consumer
The STOXX Europe 600 health care index rose 2.9
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 expect 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 4.7 percent in London after
Britain's Sunday Times newspaper reported at the weekend that
Pfizer had approached its British rival to propose a 60 billion
pound ($101 billion) takeover.
Major European stock markets had been closed since Thursday
for the Easter holiday.
GlaxoSmithKline jumped 5.2 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 2.3 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.
The FTSEurofirst 300 index of top European shares
closed 1.3 percent higher at 1,346.57 points, having extended
gains in the afternoon after European Commission data showed
euro zone consumer confidence rose more than expected in April.
The index has gained 3.4 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 1.4 percent to 3,199.69 points.
PHILIPS IN THE DARK
Shares in Philips tumbled 4.7 percent after the
healthcare, lighting and consumer appliances group reported a
bigger-than-expected fall in quarterly operating profit.
It also warned 2014 would be challenging, blaming
unfavourable exchange rates and slowing demand for medical
equipment in China and Russia.
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 Mark Trevelyan)