Miners higher as gold futures climb; autos also advance
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares jumped on Monday, erasing losses made in the last four sessions, as the U.S. dollar declined and deal speculation over chocolate maker Cadbury gathered pace.
After declining for most of last week, the pan-European Dow Jones Stoxx 600 index (ST:SXXP 248.92, +5.30, +2.18%) rose 1.8% to 247.97 on Monday.
Regional equity markets were just as strong, with the French CAC-40 index (FR:PX1 3,820, +90.58, +2.43%) up 2% to 3,803.81, the U.K. FTSE 100 index (UK:UKX 5,369, +118.07, +2.25%) up 1.8% to 5,348.23 and the German DAX index (DX:DAX 5,809, +145.82, +2.58%) up 2% to 5,776.63.
Asian stocks ended Monday's session mostly higher while U.S. stocks started with sharp gains on Wall Street. Read more on U.S. stocks.
On Friday, the Stoxx 600 index closed down 0.8%, 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 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," said Philippe Gijsels, strategist at Fortis Bank. "Traders are selling dollars and buying other assets. It's an easy trade to do."
The dollar fell against the euro and sterling on Monday and stocks and commodities advanced.
"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.
Miners were particularly strong in Europe after gold hit another record in electronic trading. Read more on gold.
Shares of Randgold Resources (UK:RRS 5,155, +200.00, +4.04%) (GOLD 85.60, +2.33, +2.80%) rose 4.1%, silver miner Fresnillo (UK:FRES 916.00, +41.00, +4.68%) also advanced 4.1% and copper miner Kazakhmys (UK:KAZ 1,332, +68.00, +5.37%) climbed 4.4%.
Miners are leveraged to demand and 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.
Cyclical auto firms were also higher, with Renault (FR:RNO 33.37, +1.41, +4.41%) shares up 4% after the French firm was upgraded to outperform from underperform at Credit Suisse due to the group's 44% holding in Nissan.
Deal speculation was also helping sentiment in Europe, with shares of chocolate maker Cadbury (UK:CBRY 811.00, +10.52, +1.31%) hitting a record 820 pence and moving up 1.7% to 814 pence a share.
Kraft Foods (KFT 27.42, +0.25, +0.92%) 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 36.93, -0.25, -0.68%) is weighing a $17 billion bid that would offer more cash to shareholders.
Over the weekend, Bloomberg reported that Swiss food producer Nestle (CH:NESN 48.25, +0.46, +0.96%) is reviewing its options over making a bid for the firm. Nestle shares rose 1%.
There were more broker upgrades in Europe on Monday, with Hochtief (DE:HOT 57.16, +2.11, +3.83%) shares up 4.6% after it was upgraded to buy from neutral at Goldman Sachs and added to the broker's conviction buy list.
"Despite strong share price performance year-to-date, we do not believe the current price adequately reflects the company's structural strength and exposure to attractive end markets," the broker said.
Still, Gemmab shares fell 4% in Copenhagen, bringing losses made so far this month to 36.5%, after the biotechnology firm was cut to sell from neutral at UBS.
