Telecoms, China stimulus boost European equities

EUROPEAN shares made a positive start to the week , helped by deal-making in the telecoms sector and stimulus from China, though gains were not enough to entirely erase losses from Friday’s sharp sell-off.

This week brings a raft of first-quarter trading updates from European companies, which are heading for their best earnings season for four years on the back of a weak euro and improving economic conditions.

The European Central Bank’s (ECB) bond-buying stimulus plan has kept euro zone bond yields down and supported appetite for equities, with NN Investment Partners reiterating in a note that it was “particularly positive” on European equities.

The pan-European FTSEurofirst 300 index closed up 0.8 percent, close to multi-year peaks, with Frankfurt’s DAX index enjoying the strongest rebound among major national indexes, rising 1.7 percent.

Volkswagen, the only German blue-chip stock to fall, was depressed after Scania order updates and comments from the Shanghai auto show pointed to slowing China demand.

Worries over Greece’s stalemate with international creditors sent ripples through European bond markets but had a fairly limited impact on equities. Athens’ ATG index was one of the few national share benchmarks in negative territory.

The Greek index was also hit by a law requiring public-sector entities to transfer idle cash reserves to the central bank and by Vitor Constancio saying the ECB could not offer unlimited finance to Greek banks.

Telecoms stocks including Belgacom, Deutsche Telekom and Numericable were up more than 2 percent after Liberty Global’s Belgian subsidiary Telenet said it had agreed to buy local mobile network operator Base from Dutch group KPN.

“It seems pretty good for both,” RBC Capital Markets analyst, Michael Bishop, said. “A slightly higher price for KPN than had been speculated and slightly better synergies compared to market expectations for Telenet.”

As a result of taking over Base’s network, Telenet will no longer need to rent capacity from Belgium’s No. 2 network operator, Mobistar, whose shares fell 11 percent.

Mining stocks also got a boost after China’s central bank unveiled new measures to shore up the world’s second-largest economy and top consumer of metals.

Among other standout gainers, Banca Popolare di Milano rose 4.5 percent after Italian daily Il Corriere della Sera reported a possible merger with Banco Popolare.

In Copenhagen, shares of jeweller Pandora rose 4 percent after news of e-store launches in the American market.

On the downside, oilfield services provider Petrofac fell 10.1 percent after warning that costs at its Laggan-Tormore project in the Shetland Islands would be higher than expected