Miners higher as gold futures climb; autos also advance
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares jumped on Monday, snapping a four-session run of losses, as the U.S. dollar declined and a bit of deal speculation lent a hand.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP 247.48, +3.86, +1.58%) rose 1.5% to 247.31.
On a regional level, the French CAC-40 index (FR:PX1 3,796, +66.79, +1.79%) climbed 1.8% to 3,795.72, the U.K. FTSE 100 index (UK:UKX 5,342, +91.05, +1.73%) rose 1.7% to 5,341.71 and the German DAX index (DX:DAX 5,757, +93.37, +1.65%) advanced 1.6% to 5,756.23.
Asian stocks ended Monday's session mostly higher while U.S. stock futures were pointing to a strong start on Wall Street. See Indications.
The Stoxx 600 index closed down 0.8% on Friday, bringing weekly losses to 1.7%, after European Central Bank chief Jean-Claude Trichet suggested that the central bank will remove extraordinary liquidity measures. Read more on Trichet.
But over the weekend, U.S. Federal Reserve Bank of St. Louis President James Bullard said Sunday that the U.S. central bank should continue buying mortgage-backed securities and other assets longer than currently planned, according to an interview with Dow Jones Newswires. Read more on Bullard comments.
"Central banks keep promising that they will keep stimulus measures in place for the foreseeable future. Free money will remain available," said Philippe Gijsels, strategist at Fortis Bank. "Traders are selling dollars and buying other assets. It's an easy trade to do."
The dollar moved lower against the euro and sterling on Monday.
"The correlation between the dollar and the equity market is 90%," said Gijsels. "Historically, that's huge," he said. "It's a very powerful financial flow," he added.
Gold hit a record in electronic trading, a move that helped miners advance. Read more on gold.
Cyclical auto, chemical and construction firms also were strong, with Renault (FR:RNO 33.41, +1.42, +4.42%) up 4.3% after it was upgraded to outperform from underperform at Credit Suisse due to the group's 44% holding in Nissan.
Economic indicators were painting a brighter picture on Monday with private-sector activity in the 16 nations that share the euro continuing to accelerate out of the downturn. Purchasing managers reported the strongest rise in activity in two years during November. Read more on euro zone data.
Deal speculation was also helping sentiment in Europe, with shares of chocolate maker Cadbury (UK:CBRY 814.00, +13.00, +1.62%) hitting a record 816 pence and moving up 1.6% to 813 pence a share in morning action.
Over the weekend, Bloomberg reported that Swiss food producer Nestle (CH:NESN 48.21, +0.42, +0.88%) is reviewing its options over making a bid for the firm.
Nestle shares rose 1.1%.
Kraft Foods (KFT 27.17, +0.20, +0.74%) has a bid valued at $16.4 billion in cash and stock on the table, using Friday's prices, and The Wall Street Journal reported that Hershey (HSY 37.18, +0.04, +0.11%) is weighing a $17 billion bid of that would offer more cash to shareholders. Italy's Ferrero said last week that it was also considering its options in relation to Cadbury.
Heritage Oil (UK:HOIL 480.80, -26.11, -5.15%) shares fell 6%. after it said that it's signed a binding letter of intent to sell its entire interests in Blocks 1 and 3A in Uganda to Italy's Eni (IT:ENI 17.08, +0.23, +1.36%) .
The company said it will receive as much as $1.5 billion for the assets. Following the sale, Heritage Oil said it will consider returning a portion of the proceeds to shareholders through a special dividend, which could be in the range of 75 pence to 100 pence a share. Eni shares rose 1.4% in Milan. Read more on Heritage, Eni deal.
