LSE – Dealmaking edges European stocks higher as long lockdown looms

(Reuters) – European stocks closed slightly higher on Wednesday, with deal-related gains in French grocer Carrefour and Spain’s Telefonica offsetting wider concerns about extended COVID-19 lockdowns.

Carrefour shares rose 13.4% to their highest level since August 2019 after a surprise 16.2 billion euros ($19.72 billion) takeover approach from Canadian convenience-store operator Alimentation Couche-Tard.

Its stock led gains in Paris’ CAC 40, while shares in French rival Casino rose 3.9%.

Telefonica jumped 9.7% after it agreed to sell its mobile phone masts in Europe and Latin America to U.S.-based telecom infrastructure operator American Towers for 7.7 billion euros ($9.4 billion).

While deal activity drove swings in regional markets and sectors, the pan-European STOXX 600 index rose just 0.1% as investors paused after last week’s strong rally.

Banks, travel companies and automakers fell the most on fears that prolonged restrictions in Europe to control soaring coronavirus cases will further slow a recovery in earnings and economic growth.

“We’re not going to see restrictions being lifted anytime soon, so that’s adding to fears of a decline in economic activity,” said David Madden, analyst at CMC Markets.

“The longer the economies are under lockdown the more likely we’re going to have loan defaults. That’s impacting the banks.”

Germany, Britain and the Netherlands indicated strict COVID-19 curbs would last into early February and Italy said it would extend its state of emergency to the end of April.

Investors also kept an eye on political developments in Rome after former Prime Minister Matteo Renzi threatened to pull his tiny centrist party out of the ruling coalition.

Italy’s current premier Giuseppe Conte told reporters he was working on a new coalition pact to last until the end of the legislature.

Italy’s FTSE MIB rose 0.4%, while banking stocks fell 0.7%.

JPMorgan cut its forecasts for Italy’s economy, predicting that longer restrictions will result in no growth in the first quarter versus a previous forecast of 3.5% growth.

Danish offshore wind farm developer Orsted fell 4.9% after it said that a return to more normal wind speeds this year would hit operating earnings.

Just Eat Takeaway fell 4.1% as disappointing 2020 margin guidance overshadowed a 57% jump in fourth-quarter orders.

London Stock Exchange gained 1.8% after EU antitrust regulators gave the green light for its $27 billion takeover of Refinitiv.

Siemens Gamesa and Siemens Energy rose 1.6% and 4.2% respectively after the companies said they were developing a commercial offshore wind turbine that produces hydrogen via electrolysis.