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European shares bounce off six-month lows

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European shares bounced off six-month lows on Tuesday as the focus shifted from politics to dealmaking and earnings, with paper and packaging stocks soaring after Smurfit Kappa rejected a bid approach.

Telecom Italia jumped 5.9 per cent after activist investor Elliott confirmed it had built a stake in a bid to improve governance and strategy at the company. The move could challenge the way top shareholder Vivendi is managing the company.

The pan-European STOXX 600 index ended up 0.1 per cent, coming off earlier highs following a late drop on Wall Street, while Italy’s benchmark recouped all of its losses from the previous session, up 1.8 per cent, as concerns over political uncertainty following an inconclusive election result eased. “Italy is going to be so … tied up for months that in a way it’s almost a blessing because there will not be any ability to do anything unconventional. In a way that is quite comforting for the market,” Ken Odeluga, market analyst at City Index said.

DUBLIN

The Iseq ended the day up 89 points at 6,701. The charge was led by packaging group Smurfit Kappa, which jumped 18 per cent to €33.86, after the company rejected a “highly opportunistic” unsolicited takeover approach from US rival International Paper. Up to 10 million shares were traded between its two main listings in Dublin and London. The bid gave the company a market value of €8 billion.

After being battered last week because of the weather, Ryanair was steadier, closing largely unchanged at €15.87. PaddyPower Betfair was down marginally at €92.50 after missing on the sale of William Hill’s Australia unit, which was sold to CrownBet for £168 million.

The three Iseq-listed property Reits – Hibernia, Ires and Green – all performed strongly, ending up 3.5 per cent, 1.8 per cent and 2.7 per cent respectively. One trader said the companies may have been buoyed by strong results from counterpart companies in the UK.

LONDON

Just Eat slumped 12.6 per cent after saying that a planned increase in spending in 2018 would hit core earnings. The British takeaway platform will spend an extra £50 million this year to battle competition from rivals such as Deliveroo and Uber Eats, its new chief executive said. The level of investment, however, was far above market expectations and shares fell as a result.

Smurfit Kappa’s London-listed shares closed up 19.6 per cent, their biggest ever one-day jump. “We believe an offer above €33 per share would be realistic” to start discussions between both groups, US investment bank Jefferies said in a note. It also noted a “positive M&A read” to packaging peers DS Smith and Mondi. The two groups, listed in London, rose 5.6 and 2.3 per cent respectively and were among the session’s top gainers.

EUROPE

Fiat Chrysler rose 5.7 percent following a source-based Reuters report saying the Italian-American carmaker was looking to spin off auto-parts business Magneti Marelli to its shareholders.

German autos Volkswagen, Daimler and BMW – hit earlier this week by concerns over a trade war after US President Donald Trump proposed imposing tariffs on steel and aluminium – also rose.

Those worries have dissipated slightly as Trump faces a growing pushback from political and diplomatic allies as well as US companies. Their gains helped European autos rise 1.2 per cent.

A number of stocks sustained heavy losses after giving earnings updates. Aggreko, a temporary power provider, fell 3.9 percent after reporting an 11.8 percent fall in full-year profit.

NEW YORK

US stocks traded lower on Tuesday, reversing from earlier gains prompted by signs of easing tensions in the Korean Peninsula and mounting pressure against tariffs proposed by president Donald Trump. Weighing on the Dow and S&P 500 were health insurer UnitedHealth and plane maker Boeing, while Microsoft was the biggest drag on the Nasdaq. “We’ve been moving a percent or more on many days, I don’t think there are any developments today that create the actions,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “People are just trading around their positions in the current environment.”

Last month’s US payrolls report showed wages growing at their fastest pace in more than eight years, fueling concerns that both inflation and interest rates would rise faster than expected that led to a steep selloff. Investors are keenly waiting for the upcoming February jobs data due on Friday to gauge the strength of the labour market. Target shares slipped 2.3 per cent after the big-box retailer reported lower-than-expected profit for the holiday quarter.

Additional reporting by Reuters

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