M&A lifts European shares despite Brexit worries

(Reuters) - European shares ended a choppy trading session higher on Friday, as investors weighed signs of a pick up in M&A activity against the economic threat from growing prospects of a no-deal Brexit.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 11, 2020. REUTERS/Staff

The pan-European STOXX 600 index .STOXX rose 0.1% and ended the week about 1.8% higher. The index has been in a holding pattern since June as economic growth lost momentum due to a stronger euro, increasing the cost of European exports.

Meanwhile, the EU is ramping up preparations for a tumultuous end to the four-year Brexit saga as top officials prepared to brief its 27 members on British Prime Minister Boris Johnson’s plan to break the divorce treaty.

“The Brexit talks could turn into another major headache for investors,” said Milan Cutkovic, market analyst at AxiCorp.

“UK Prime Minister Boris Johnson still intends to rewrite the UK’s Brexit treaty, even as the EU is threatening to take legal actions and the chances of securing a trade deal are decreasing.”

Most of the major sector indexes were lower, a day after the ECB held interest rates steady and said it was closely watching the euro.

Oil and gas stocks .SXEP were among the biggest decliners as crude prices fell, while defensive plays including healthcare .SXDP, telecoms .SXKP and real estate .SX86P edged higher.

M&A activity took centre stage, with Altice Europe's ATCA.AS shares soaring 24.4% to a three-month high and on top of the STOXX 600 after it agreed to be bought by its founder Patrick Drahi.

Swiss frozen baked goods maker Aryzta ARYN.S jumped 12.5% after it said it was in advanced talks with private equity firm Elliott Advisors over a takeover deal.

The pan-European Euronext exchange ENX.PA edged 1.7% higher as it confirmed with Italian state lender Cassa Depositi e Prestiti (CDP) that they were in talks to buy the Milan stock exchange Borsa Italiana.

France's CAC 40 index .FCHI saw some changes to its components. Accor ACCP.PA dropped 4.3% on its exclusion from the index, while Alstom ALSO.PA jumped 1.6% on being included.

Reporting by Shreyashi Sanyal in Bengaluru; Editing by Anil D’Silva and Mark Potter