Linde falls after offering $4.6 billion for Lincare; Barclays gains
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — European stocks maintained solid gains Monday, with investors looking ahead to a European Central Bank policy meeting for additional monetary stimulus after last week’s summit meeting of European Union leaders produced more progress than expected toward shoring up the euro-zone banking sector.
The Stoxx 600 Europe index XX:SXXP +1.10% gained 1.1% to 253.42, extending Friday’s big rally.
European equities trimmed gains after a gauge of U.S. manufacturing activity fell more than expected in June.
The Institute for Supply Management said its June index declined to 49.7% from 53.5% in May. Economists surveyed by MarketWatch had forecast a reading of 52.3%. A reading of less than 50% indicates a contraction in activity.
U.S. stocks traded in negative territory. U.S. markets
In Europe, banks ranked among Monday’s top gainers, with HSBC Holdings PLC UK:HSBA +0.78% HBC +0.78% advancing 0.8% in London, while BNP Paribas SA FR:BNP +4.24% gained 4.7% in Paris.
Resource firms also scored solid gains, with oil major BP PLC UK:BP +1.55% adding 1.6%.
The positive tone was tied to investor hopes the “ECB will step in” this week and deliver an interest-rate cut as well as additional measures aimed at spurring economic growth following the EU summit, said Heino Ruland, strategist at Ruland Research in Eppstein, Germany.
The central bank is widely expected to deliver a quarter-of-a-point cut on Thursday, which would take its refi rate down to a record low of 0.75%.
European equities posted their biggest one-day rally of 2012 on Friday, with the Stoxx 600 jumping 2.7%. Spanish stocks saw their biggest one-day rise since May 2010 after European leaders agreed to allow Europe’s rescue funds to directly recapitalize ailing banks once a euro-zone-wide bank regulator is in place and to buy distressed government bonds without forcing a country to submit to bailout procedures.
However, the Friday move appeared to be driven in large part by short covering and other factors, Ruland and other strategists said.
“Friday’s rally was more about surprise, goodwill that some progress has been made, short covering and month-end shenanigans. At the end of the day Spain and Italy’s fate probably rests with their ability to stabilize growth. This remains challenging and the summit hasn’t changed much,” said James Reid, strategist at Deutsche Bank in London.
Spain’s IBEX 35 index XX:IBEX -0.23% fell 0.3% to 7,081.20 in the first day of trading for the second half of 2012.
Economic data offered investors little reason to cheer, analysts said. The Markit purchasing managers' index for the euro-zone manufacturing sector came in at 45.1 in June, up from a preliminary reading of 44.8 but matching the nearly three-year low scored in May. A reading of less than 50 signals a contraction in activity.
European statistics agency Eurostat said the unemployment rate in the 17-nation euro area rose to 11.1% in May from 11% the previous month, the highest level since the statistical series began in 1995.
On the downside in Europe, shares of Vestas Wind Systems A/S DK:VWS -8.08% fell 7.7% in Copenhagen after a news report on Sunday said that the wind-turbine maker is discussing a debt restructuring with two banks. A Vestas spokesman didn’t immediately return a request for comment.
Shares of Rhoen Klinikum AG DE:RHK -7.37% fell more than 8%.
A 3.1 billion euro ($3.9 billion) takeover offer for the clinic operator by German health-care company Fresenius SE DE:FRE +0.30% failed, falling short of the required 90% acceptance from holders, reports said.
Fresenius shares slipped 0.6%. Overall, Germany’s DAX 30 index DX:DAX +1.01% rose 1.1% to 6,485.08, as engineering firm Siemens AG DE:SIE +1.25% rose 1.5%, while insurer Allianz SE DE:ALV +1.27% added 1.7% and Deutsche Bank AG DE:DBK +1.44% gained 1.4%.
Linde AG XE:LIN -2.12% dropped 2.2% after the German gases and engineering company said late Sunday that it has offered to buy U.S. home health-care company Lincare Holdings Inc. LNCR +21.46% LNCR +21.46% LNCR +21.46% Linde will offer $41.50 a share, or $4.6 billion, in cash to Lincare shareholders.
London’s FTSE 100 stock index UK:UKX +0.63% gained 0.7% to 5,613.23.
Shares of Barclays UK:BARC +3.21% BCS +2.82% surged 3.3%. Marcus Agius stepped down as chairman in the wake of the bank paying a massive fine last week to settle charges it engaged in manipulation and false reporting of benchmark interest rates. Barclays posted a double-digit percentage loss last week. Read more about Barclays.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
