Reuters: European shares fell on Friday as concern over the tension between Britain and Iran pushed up oil prices and eclipsed a fresh burst of supportive merger news.
By Amanda Cooper
LONDON, March 30 (Reuters) – European shares fell on Friday as concern over the tension between Britain and Iran pushed up oil prices and eclipsed a fresh burst of supportive merger news.
Markets got off to an uneasy start as London and Tehran still had not reached an agreement on the release of 15 British sailors and marines seized by Iran last week.
Strong gains on Wall Street prompted by rising oil prices and news of British pharmaceuticals trader Alliance Boots receiving an improved buy-out offer did not offset the negative tone set by the political tensions.
“(M&A) is definitely strong and will remain strong but fears about Iran tensions and rising oil prices are definitely a negative for the European stock markets and that is what we have to read into the markets on this day,” said Franz Wenzel, a European strategist at AXA Investment Managers in Paris.
The pan-European FTSEurofirst 300 index was down 0.2 percent at 1,513.94.
In other European markets, London’s FTSE 100 index dipped slightly, while Frankfurt’s DAX was still holding steady and Paris’ CAC 40 fell 0.2 percent.
In the most recent round of M&A activity, Alliance Boots said it had received a sweetened 10 billion pound ($19.7 billion) bid proposal from its deputy chairman and private equity firm Kohlberg Kravis Roberts.
Alliance Boots shares were up 0.7 percent at 1,034 pence.
But it was Kingfisher, Europe’s largest home improvements retailer, that was the top gainer of morning following media reports that the private equity arm of Goldman Sachs is mulling a bid.
Kingfisher shares rallied almost 3 percent to 278.5 pence, having hit two-year highs in earlier trade.
Meanwhile, Spanish airline Iberia said it had received a 3.4 billion euro ($4.5 billion) bid approach from private equity firm Texas Pacific Group.
But investors were unimpressed as Iberia shares fell 2.5 percent to 3.90 euros on Madrid’s blue-chip Ibex index.
German banking shares got a lift after the head of Citigroup’s German unit said the company was looking for acquisitions.
Shares in Commerzbank were up over 3 percent, while Deutsche Bank shares fell 0.4 percent and Postbank rose 1.4 percent.
Among the laggards was Vodaphone Group Plc, which shed 3.5 percent after reporting lower than expected margins at its UK operations on Friday and warned competetive and regulatory pressures troubling its core European businesses would continue in the year ahead.
U.S. economic data later in the day should give some insight into whether core consumer price pressures abated in February and if activity in the auto-intensive Midwest picked up in March after staging an alarming contraction the prior month.
“The Chicago PMI will be key after soft durable goods,” said Geoff Kendrick, currency strategist at Westpac, adding that a weak report would get people “thinking about a serious softening in the U.S. economy,” said Geoff Kendrick, currency strategist at Westpac.
“There is a marginal upside risk (in the PCE), but the issue is the Fed won’t hike again if the economy is slowing. The question is when they cut and that has to do with inflation,” he said.”
(additional reporting by Natsuko Waki)
