M&A shakes up European shares while energy, financials decline (updated)

L E Lundbergforetagen AB (publ)

14/05/2018 09:52

* EDP jumps above China Three Gorges offer price
    * Large loan losses send ABN Amro shares down 4.4 pct
    * IWG soars 21 percent as three suitors approach company
    * Trump U-turn on ZTE ban hits Nokia, Ericsson shares

 (Updates prices, adds quotes, detail)
    By Helen Reid
    LONDON, May 14 (Reuters) - Weak energy and financials stocks
sent European shares down on Monday after a strong run of weekly
gains, while dealmaking livened up trading with Portugal's EDP
and Britain's IWG both surging higher on takeover offers.
    Oil stocks weighed on the market as crude prices fell away
from multi-year highs due to a surge in U.S. drilling activity
and resistance in Europe and Asia to U.S. sanctions against
Iran.  urn:newsml:reuters.com:*:nL3N1SL1HE
    The STOXX 600 oil & gas index  .SXEP  fell 0.4 percent,
while the broad pan-European index  .STOXX  inched down 0.1
percent.
    Italy's FTSE MIB  .FTMIB  stayed just in positive territory
as investors shrugged off progress in government-forming talks
between the anti-establishment 5-Star Movement and the far-right
League. 
    M&A dominated trading, continuing a trend which has set 2018
up to be one of the strongest ever years for dealmaking volumes.
    EDP  EDP.LS  shares climbed 10.9 percent after China's
state-owned utility China Three Gorges offered $10.8 billion to
take control of the Portuguese power firm.  urn:newsml:reuters.com:*:nL8N1SI6C1
    The stock rose to well above the bid price, which offered a
premium of just under 5 percent to its closing price on Friday.
    "We believe the price offered is too low for CTG to achieve
full control of a vehicle that provides, among other things, a
strategic footprint into U.S. renewables, and we expect
management/minorities to claim a higher price," said JP Morgan
analysts. 
    Analysts at Goldman Sachs also noted potential regulatory
obstacles as the deal will have to be cleared by many countries'
regulators including the U.S. Committee on Foreign Investment. 
    Shares in IWG  IWG.L  shot up 19.8 percent to the top of the
STOXX after the British workspace provider said it had been
approached for a takeover by three rival suitors.  urn:newsml:reuters.com:*:nL8N1SI5SI
    In results-driven moves, Dutch bank ABN Amro  ABNd.AS  fell
4.6 percent, dragging the financials sector down. It reported a
drop in first-quarter net profit due to ongoing problems in the
oil sector, leading to impairments on loans to shipping and
offshore services clients.  urn:newsml:reuters.com:*:nL5N1SL0N4
    "Loan losses were more than three times consensus forecast
at 30 basis points in the quarter... The large increase in loan
losses is likely to raise questions about the asset quality
outlook," UBS analysts said. 
    Healthcare stocks were the best-performing, following a
rally in U.S. pharma on Friday after investors found U.S.
President Trump's speech on drug prices less harmful than
expected for pharma companies' business models.
    "We see limited impact from Trump's blueprint on drug
pricing," said Credit Suisse analysts. "While investors will
feel a sense of relief coming out of Friday, we believe the
broader overhang around drug pricing reform will persist as we
approach the 2018 U.S. midterm elections."
    The healthcare sector index  .SXDP  climbed 0.7 percent. 
    Easing U.S.-China trade tensions failed to boost European
markets, and Trump's U-turn on Chinese phone company ZTE, the
world's 4th largest telecom equipment vendor, actually sent
Nokia  NOKIA.HE  shares down 3.3 percent, while Ericsson
 ERICb.ST  fell 1.6 percent.
    Investors had hoped the Nordic telecom equipment companies
would see stronger sales and margins after the U.S. Commerce
Department banned American supplies to ZTE and the firm
suspended operations.  urn:newsml:reuters.com:*:nL5N1SL1N2
    Swedish property and investment company Lundbergs  LUNDb.ST 
issued bonus 1:1 shares, doubling the number of shares in the
company and halving the share price.  urn:newsml:reuters.com:*:nFNW8P3XHf
    With three-quarters of the MSCI Europe index having reported
earnings, energy stocks were leading the market by far, with
year-on-year earnings growth of 10.5 percent while the overall
market's earnings growth was flat in euro terms.
    

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Benchmarks May 14    https://reut.rs/2KiYHrA
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 (Reporting by Helen Reid; Editing by Julien Ponthus and Jon
Boyle)
 ((mailto:Helen.Reid@thomsonreuters.com; +44 20 7542 0402;))