European shares end April on a high as UK merger shakes up retail

A multibillion pound merger between British supermarket Sainsbury's and Asda shook up retail stocks on Monday, while European benchmarks ended April with their strongest monthly gains since 2016.

The pan-European Stoxx index rose 0.1 per cent, while Germany’ s Dax gained 0.3 per cent, buoyed by investors’ improved risk appetite as inter-Korea tensions eased and companies delivered strong earnings.

The regional benchmark delivered a 3.8 per cent gain in April, its strongest month since December 2016, after suffering losses in February and March – testament to renewed investor optimism after a volatility shock in February rattled markets.

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The Iseq index of shares was largely flat on the day, closing up 6 points at 6,805. The biggest mover was Swiss-Irish food group Aryzta, which ended the session 6.4 per cent down at €17.50 following a broker's note from EBS which downgraded its short-term outlook for the food group's share price.

While at one remove from retail and the big UK merger story, Kerry, Ireland's largest food firm, saw its shares fall 1.2 per cent to €84.50, while rival Glanbia was largely unchanged at €14. Ryanair, which has suffered recently on foot of rising oil prices, rose 1.1 per cent to €15.51.

On a quiet day for financials around Europe, AIB shares were still down nearly 0.8 per cent at €4.95, while Bank of Ireland shares were marginally up at €7.45. Rival Permanent TSB was unchanged at €1.75.

LONDON

Sainsbury's shares jumped as much as 21 per cent to 327.1p at one stage following the news of its potential tie-up with rival Asda, their highest since July 2014, before ending around 14 per cent up on the day.

Shares in rivals Tesco and Morrisons fell. Tesco, which would be overtaken as UK leader by the new merged group, fell 0.9 per cent on the news. Morrisons slipped at the opening but finished 1.3 percent higher.

In results-driven moves, the world's biggest advertising group WPP surged 8.6 per cent after reporting forecast-beating sales in its first results without founder Martin Sorrell. The agency's gains boosted the pan-European media sector by 1.4 per cent to a three-month high.

Glencore dropped 5 per cent after mining subsidiaries in the Democratic Republic of Congo were served freezing orders for alleged unpaid royalties of nearly $3 billion.

EUROPE

The reaction among European retailers to the UK supermarket merger announcement was mixed. France's Carrefour gained 0.9 per cent and Casino rose 1 per cent, while Ahold Delhaize declined 0.4 per cent.

In other deal news, Deutsche Telekom shares ended the day down 0.7 per cent, having earlier risen to the top of the Dax after the German firm clinched a $26 billion deal to merge T-Mobile US and Sprint. AccorHotels rose 1.9 per cent after the French hotel chain agreed to buy rival Movenpick Hotels & Resorts for $567 million.

A drag on the banking sector was Sweden's SEB, which tumbled 4.5 per cent after reporting first-quarter profit below market expectations as cautious corporate customers and a seasonal slowdown hampered earnings.

French construction materials firm Imerys fell 5.2 per cent after reporting results.

Overall, Europe’ s first-quarter results season has kicked off relatively weakly, particularly compared to the first quarter of 2017. Earnings have surprised negatively, on average, in the banking sector, while commodity-related sectors have reported surprisingly strong results thanks to higher materials prices, according to Goldman Sachs.

NEW YORK

US stocks rose on Monday as strong earnings reports from McDonald's and a slate of merger announcements lifted sentiment, while inflation worries were kept in check after tepid data on US income and spending.

McDonald’s jumped 5.3 per cent after the world’s biggest fast-food chain by revenue topped analysts’ forecasts for profit and sales.

Shares of oil refiner Andeavor surged 14.4 per cent, the biggest percentage gainer on the S&P 500, after rival Marathon Petroleum agreed to buy the company for more than $23 billion. Marathon's shares slid 4.2 per cent.

Walmart rose about 2 per cent after Sainsbury's agreed to buy the UK arm of Walmart, Asda, for about $10 billion, while Marriott Vacations Worldwide said it would buy timeshare operator ILG for $4.7 billion, sending the target company's shares up 4.5 per cent.

Another big deal announcement was that of T-Mobile's $26 billion takeover of fellow wireless carrier Sprint. Sprint shares fell 13.5 per cent as analysts said it could face antitrust hurdles and the offer was seen as less favourable than an earlier one. – Additional reporting: Reuters