London: European shares bounced back on Tuesday, lifted by strong company results and corporate takeover activity after falling in the previous five sessions due to concerns over China’s growth.
The pan-European FTSEurofirst 300 index was up 1.2 per cent at 1,548.47 points going into the middle of the trading session. The index had tumbled in the last five sessions and touched a two-week low on Monday.
The Eurozone’s blue-chip Euro Stoxx 50 index also recovered to rise 1.5 per cent.
The Stoxx Europe 600 Insurance Index advanced 1.6 per cent, buoyed by Zurich Insurance’s possible bid for rival RSA, which caused RSA shares to surge 15 per cent.
Kering also climbed 7.4 per cent after Gucci, the flagship brand of the French luxury group, posted a 4.6 per cent rise in underlying second-quarter sales.
Melrose jumped 10.7 per cent after saying it would sell its Elster business to Honeywell for £3.3 billion ($5 billion; Dh18.82 billion). Engineering group GKN gained 7.1 per cent after agreeing to buy Fokker Technologies for €706 million.
“The market has been preoccupied with uncertainties related to China in the last couple of days, but those concerns are taking a back seat today and equities are getting some support from company earnings and M&A,” Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.
In the past five days, fears for China’s economic growth had dominated the market. Shanghai shares fell again on Tuesday even after Beijing pledged to lend support, while investors were also expecting a two-day US Federal Reserve meeting starting later in the day to show that US interest rates may rise in September.
Higher rates can often hit stock markets, as they boost returns on bonds and cash, and can result in higher interest costs for companies.
Nevertheless, some traders said the outlook for European shares looked resilient, given record low interest rates in Europe and measures by the European Central Bank (ECB) to boost liquidity and stimulate economic growth in the region.
“In Asia, it’s a whole different story, but in Europe I’m not too concerned,” said Andreas Clenow, hedge fund manager and principal at ACIES Asset Management.
