Europe's leading stock exchanges traded lower as some investors chose to lock in profits after a strong recovery from March lows, with merger and acquisition activity in the media and mining sectors grabbing the early spotlight. At 9.31 am, the STOXX 50 was down 16.39 points at 3,887.72 while the STOXX 600 was down 1.64 points at 391.21. "People are saying that the market looks overbought at these levels. However, they have been saying that about every multi-year high for the last 6 months," said James Yates, a dealer at CMC Markets. At the same time, said Yates, blue chip indices have "closed higher about 80 pct of the time over the last 30-40 trading days, so you would expect to see some profit-taking." Merger and acquisition supplied the early focus for investors.
Reuters -- which rose 25 pct on Friday -- added another 5.56 pct as the UK financial information provider detailed the current state of play with Thomson Corp -- which confirmed last night it has made a preliminary approach to the UK group. Reuters indicated that a trust with the power to block any takeover would not stand in the way of a 8.75 bln stg cash-and-shares bid by the Canadian group.
In a joint statement, Reuters and Thomson said they were still in discussions over a combination of the two businesses, which would slash costs by more than 500 mln usd within three years. "Both boards believe there is a powerful and compelling logic for the combination which would create a global leader in the business-to-business information markets," they said.
The Founders Shares Company is a private body with the power to block any party gaining more than 15 pct of Reuters shares. Its support is required to approve any takeover of Reuters.
However, the two companies warned that the proposed merger is "a large and complex transaction", and that there can be no assurance that agreement will be reached.
Ahead of the announcement, the Guardian suggested any tie-up could face regulatory hurdles.
Reuters and Thomson control a combined 34 pct of the financial data market and a combined group would be just ahead of the industry-leading Bloomberg, which has a 33 pct share, the paper said.
In a knock-on effect, shares in Schibsted ASA rose 3.4 pct as the Norwegian media group's stock benefited from the M&A speculation surrounding not only Reuters, but also News Corp's takeover offer for Dow Jones. There was also talk of a round of consolidation in the mining sector after US aluminium giant Alcoa launched a cash-and-share offer of 27 bln usd for its Canadian rival Alcan on Monday. Dealers noted speculation that mining companies including BHP Billiton and Rio Tinto could counter the bid for Alcan. Alcoa could also become a target, with Anglo American among those that might be prepared to make an offer, they say.
Meanwhile, Acerinox shares fell 2.6 pct as solid first-quarter results were offset by analyst concern over the outlook for the company's profit margins.
"We expect a combination of a falling base stainless price and nickel prices, as we predict in the second half of the year, to erode margins further," said UBS in a note to clients.
Elsewhere, shares in Deutsche Bank dipped 0.9 pct as some investors chose to lock in profits after the bank's stock rose in early trading on better-than-expected results. In a similar vein, shares in Swiss Re traded lower on profit-taking after the insurance company posted a solid first quarter and reaffirmed its earnings per share target of 10 pct growth. Swiss Re was last down 1.6 pct largely wiping out a 1.7 pct rise over the last two sessions.
Shares in KPN NV were down 2.7 pct after the telecom company's reported what analysts called a "mixed bag" of results. Clariant was off 1.5 pct amid some analyst disappointment that the specialty chemicals group's restructuring efforts did not yield better profit margins in the first quarter. Adecco shares fell 1.1 pct as some analysts gave a lukewarm reception to the staffing firm's latest quarterly results. Broker Citigroup said growth in its French and US markets are still worse than its peers while an improvement in Germany was "somewhat below expectations." Personal staffing revenue also disappointed, said the broker. Adecco, however, confirmed its sales growth targets and its operating margin objectives. Adidas shares rallied 5.7 pct after the sports equipment manufacturer released first-quarter figures that topped analyst estimates. Investors had feared the company's earnings could disappoint after disappointing results from Puma, one of its main competitors. On the economic front, sentiment will likely be dominated by this week's interest-rate setting meetings. While the FOMC and ECB are widely expected to leave rates unchanged, the BoE is expected to lift rates by 25 bps. Some say economists say a 50-basis point rise cannot be ruled out.
Source : www.sharewatch.com
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