PARIS: European shares marched higher on Wednesday, led by a rally in energy stocks after Royal Dutch Shell agreed to buy BG Group for 47 billion pounds ($70 billion) in the first oil super-merger for a decade.
BG shares jumped 31.8 percent, Tullow Oil soared 8.7 percent and BP gained 1.5 percent. Royal Dutch Shell fell 3.3 percent, reflecting the high premium it is paying for BG.
The STOXX Europe 600 Oil & Gas Index, hammered in the past year as oil prices tumbled, advanced 3.8 percent and the sector’s rise enabled the pan-European FTSEurofirst 300 index to progress 0.2 percent to 1,615.85 points.
“The sector has been ripe for consolidation given the bearish outlook for oil prices, and we could see other takeovers in the industry in the coming weeks and months. Overall, the M&A wave which is spreading to a number of sectors is very good for the market,” said Saxo Bank trader Andrea Tueni.
The FTSEurofirst was close to an eight-year high while France’s CAC stood near its highest level in around 7-1/2 years.
Shell’s move for BG came a day after FedEx’s 4.4 billion-euro ($4.8 billion) bid for Dutch package delivery firm TNT Express sparked a rally in that particular sector.
The mergers and acquisitions (M&A) momentum also spread to the media industry on Wednesday, with traders citing bid rumors as moving Sky higher. A spokesman for Sky declined to comment on the market speculation.
“The M&A momentum is keeping things on a firmer footing,” said Mike Turner, European equity options broker at XBZ Ltd.
Traders added that expectations for a solid set of first-quarter results from European companies were also providing a positive backdrop for the region’s stock markets.
First-quarter earnings for the pan-European STOXX 600 index are projected to rise 0.4 percent from a year ago, according to Thomson Reuters data.
However, shares in carmakers lost ground, trimming gains made since the start of the year, after a number of brokers raised doubts about valuation ratios in the sector.
Peugeot fell by 2 percent and BMW retreated 1.4 percent.
The Greek stock market also fell 1.3 percent, which traders attributed to nervousness a day ahead of a deadline for Greece to repay a loan to the International Monetary Fund.