By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- Drug makers took center stage in
European trading Tuesday, with shares of AstraZeneca PLC climbing
on news of a potential takeover bid, and GlaxoSmithKline PLC rising
as it sells one of its units in a multibillion-dollar deal.
The Stoxx Europe 600 rose 1.1% to 336.15, as investors returned
from a four-day Easter holiday break to a slate of developments in
the pharmaceutical sector, the best-performing group on the
pan-European index.
Topping U.K. equity advancers was AstraZeneca , with a 7% leap
in shares following a Daily Telegraph report that the British drug
maker has hired Goldman Sachs and Morgan Stanley to advise it if
Pfizer Inc. (PFE) were to again attempt talks with the company
about a takeover bid.
U.S.-listed shares of AstraZeneca surged 8.8% on Monday
following a report by the Sunday Times of London that Pfizer -- the
largest drug maker in the U.S. -- had approached AstraZeneca about
a possible merger.
Stock in Novartis AG rose 2.1% as the Swiss company on Tuesday
outlined changes in its portfolio lineup, including plans to buy
GlaxoSmithKline PLC's oncology unit for about $14.5 billion.
Novartis also plans to sell its vaccines unit to Glaxo for $5.25
billion. Glaxo shares climbed 5.5%.
Participating in the rise in drug stocks, Bayer AG picked up
3.3%, Hikma Pharmaceuticals PLC latched onto a 4.8% gain, and
Danish firm Novo Nordisk AS (NVO) kicked higher by 3.1%.
Gains for Glaxo helped the U.K.'s FTSE 100 index rise 1% to
6,690.47. Germany's DAX 30 pushed 1.5% higher to 9,547.47, and
France's CAC 40 index advanced 0.9% to 4,470.30.
Outside of deal news, Philips NV (PHG) fell 7% after the
company's first-quarter profit fell 14%, and as it spoke of a
"challenging start to the year." Net profit for the diversified
technology group's first quarter fell to 138 million euros ($190.5
million) from EUR161 million in the year-ago period. Revenue fell
to EUR5.02 billion from EUR5.26 billion a year ago, hurt on
currency weakness.
Investors appeared to set aside news over the weekend about
further unrest in Ukraine, with five people reportedly shot dead at
a checkpoint near the eastern city of Slavyansk. The shooting came
after the Ukrainian government said it wouldn't battle pro-Russian
protestors who were occupying public buildings during the Easter
holiday. U.S. Vice President Joe Biden in Kiev on Tuesday expressed
support for Ukraine's new government, while the U.S. prepared new
sanctions against Russia.
Heightened uncertainty about Ukraine has driven recent "risk
off" market sentiment, but other, more fundamental "red flags" for
equities -- including a rotation of market leadership, a rally in
bonds this year and flattening of the yield curve, and weakness in
copper and other commodity prices -- don't change the bullish
backdrop for the market, said J.P. Morgan Cazenove in a report
Tuesday. Earnings in the euro zone look likely to grow for the
first time in four years, and the activity backdrop is "robust" in
Europe and in the U.S., it said.
"In our view, equities remain attractively valued vs. other
asset classes, and the inflows are steadily coming through," said
analyst Mislav Matejka in the report, adding that they are "using
dips as an opportunity to add further to Euro recovery plays" such
as euro-zone banks, and value and cyclical stocks.
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