Legal & General, Cairn Energy shares jump; Babcock to buy VT Group By Sarah Turner, MarketWatch LONDON (MarketWatch) -- European shares rose on Tuesday, helped by earnings-related gains from Legal & General and Cairn Energy and a takeover agreement for VT Group. The Stoxx Europe 600 index (ST:SXXP 261.47, +1.35, +0.52%) advanced 0.6% to 261.77 after losing ground for three straight sessions. "I think that the weakness was a reaction to how overbought the markets were," said Oliver Russ, strategist at Argonaut Asset Management, noting that European equities notched annual highs last week. Helping the advance on Tuesday, shares of insurance and investments group Legal & General (UK:LGEN 83.40, +2.15, +2.64%) jumped 4.3% after it swung to a net profit of 863 million pounds ($1.3 billion) in 2009 from a loss of 1.07 billion pounds a year earlier, when the group was hit by hefty charges. Another notable mover, oil-exploration firm Cairn Energy (UK:CNE 419.30, +40.30, +10.64%) jumped 7.4%. Fiscal-year net profit declined to $24.7 million, from $348.8 million a year ago as gains from asset sales decreased sharply and an impairment charge weighed but the firm said that its Rajasthan development could producer as much as 240,000 barrels of oil per day. On a regional level, the U.K. FTSE 100 index (UK:UKX 5,682, +37.49, +0.66%) rose 0.8% to 5,691.33, the German DAX index (DX:DAX 6,012, +23.82, +0.40%) climbed 0.6% to 6,020.96 and the French CAC-40 index (FR:PX1 3,951, +22.89, +0.58%) rose 0.7% to 3,9573.01. Asian shares traded mixed while U.S. stock futures were pointing to a mildly higher start on Wall Street. "I think that the U.S. is starting to attract capital," said Russ. "U.S. facing, dollar earners are quite appealing," he added, giving oil majors, drugmakers and autos such as truck maker Volvo (SE:VOLVB 73.60, -0.40, -0.54%) , up 1%, as examples. Autos were generally strong in Europe on Tuesday, with BMW (DE:BMW 33.36, +0.71, +2.16%) shares up 2.8%. J.P. Morgan Cazenove European equity strategist Mislav Matejka said in a note that he believes cyclical exporters and banks will lead gains if markets manage to rise significantly from this point. "Despite recent good gains, we still see risks stacked to the upside," he said. "The economic surprise index is turning up, macro momentum remains robust, we expect a clear inflection point in the labor market, and positive first-quarter preannouncements" Banks were higher on Tuesday, with UniCredit (IT:UCG 2.16, +0.03, +1.17%) shares up 1.6% and BBVA (ES:BBVA 10.30, +0.11, +1.08%) shares up 1.3%. As well, deal making was lending a hand with shares of VT Group (UK:VTG 729.00, +38.50, +5.58%) up 5.8% at 730 pence after Babcock International (UK:BAB 565.50, +33.00, +6.20%) said that it will buy the firm for 1.326 billion pounds ($2.0 billion). Babcock will pay 361.6 pence per share in cash and 0.701 new shares to buy the firm. The consideration values each VT share at 750 pence, based on a closing price of 554 pence per Babcock share on Feb. 12. Babcock traded up 6.6% at 567 pence on Tuesday. "The acquisition of such a high quality and complementary business is in line with our strategy to be the leading engineering-support services company in the U.K.," said Chairman Mike Turner. On the downside, shares of Merck KGaA (DE:MRK 59.69, -0.76, -1.26%) lost 1.3% after the drug maker said it has temporarily suspended its clinical program for Stimuvax after a patient participating in Phase II trials developed encephalitis. Austria's Raiffeisen International Bank-Holding lost 1.9%. Consolidated profit after tax and minorities dropped 78.4% to 212 million euros ($287 million) in 2009, from 982 million euros in the previous year and the bank cut its dividend by 78.5% to 20 European cents a share. In addition, Raiffeisen Zentralbank Oesterreich and its exchange-listed subsidiary Raiffeisen International confirmed that they plan to merge, as they had disclosed in February. Read more on merger plans.

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