Europe Stocks Little Changed as M&A Offsets Utility Drop

European stocks were little changed from a five-week high, as investors awaited U.S. earnings next week, while merger and acquisition activity offset a selloff in Spanish utility companies.

Invensys Plc surged 15 percent after Schneider Electric SA offered about 3.3 billion pounds ($5 billion) for the U.K. company. Phoenix Group Holdings rose 10 percent after saying it is in talks to combine with a unit of Swiss Re. Spanish utilities slid on government plans to cut profit for renewable energy companies and the electric grid operator.

The benchmark Stoxx Europe 600 Index fell 0.1 percent to 296.2 at the close of trading, after earlier advancing as much as 0.6 percent. The gauge has climbed 2.7 percent this week after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still needs stimulus and Alcoa Inc. started the earnings season with better-than-estimated results.

“The earnings seasons starts in earnest next week and that is going to be key for the market,” said Nick Xanders, an equity strategist at BTIG Ltd. in London. “Investors will likely focus on the full year guidance given a large proportion of companies were expecting a second half rebound when they gave guidance at the end of Q1.”

Citigroup Inc. and Goldman Sachs Group Inc. are among companies to report earnings in the U.S. next week. Profit at companies listed on the Standard & Poor’s 500 Index probably rose 1.8 percent last quarter, according to Bloomberg data. That compares with a projection of 8.7 percent six months ago.

National Indexes

National benchmark indexes climbed in eight of the 18 western-European markets today. The U.K.’s FTSE 100 rose less than 0.1 percent while Germany’s DAX climbed 0.7 percent. France’s CAC 40 dropped 0.4 percent.

Invensys jumped 15 percent to 508 pence after Schneider Electric, the world’s largest maker of low- and medium-voltage equipment, offered to pay 505 pence a share for the British company. The bid comprises 319 pence in cash and 186 pence in new Schneider shares. Invensys said it indicated to the French company that it will probably recommend the offer. Schneider fell 4.1 percent to 55.70 euros in Paris.

Phoenix jumped 10 percent to 719 pence after the U.K.’s biggest manager of closed life-insurance funds said it’s in preliminary talks to combine with Swiss Re’s Admin Re unit.

Sky News reported on the talks late yesterday, saying it would be a 3 billion-pound merger and would create a business with more than 100 billion pounds under management and close to 10 million policy holders. Swiss Re rose 0.6 percent to 72.30 Swiss francs in Zurich.

Swedish Match

Swedish Match AB gained 2.6 percent to 248.60 kronor in Stockholm after the Daily Mail reported speculation that Imperial Tobacco Group Plc may make a bid of 350 kronor ($52.51) a share for the maker of smokeless-tobacco products. The newspaper did not cite anyone.

Daimler AG jumped 6.2 percent to 52.35 euros. The world’s third-largest maker of luxury cars posted second-quarter profit that beat analyst predictions following the sale of its final holding in the parent company of planemaker Airbus SAS.

Earnings before interest and taxes totaled 5.2 billion euros ($6.8 billion), the Stuttgart, Germany-based company said in a statement. Profit exceeded the 3.31 billion euros average of six analyst estimates compiled by Bloomberg.

SAP AG climbed 1.2 percent to 57.36 euros and Cap Gemini SA gained 1.8 percent to 39.95 euros as peer Infosys Ltd. surged the most in six months in Mumbai trading after first-quarter profit rose and the company’s sales forecast in dollar terms beat analyst estimates.

Peugeot Alliance

PSA Peugeot Citroen rallied 4.2 percent to 7.87 euros, its highest price in a year, amid speculation the carmaker may form an alliance and succeed in a turnaround.

“The first-half sales weren’t so bad, and the company seems to be getting its cash burn under control,” said Sascha Gommel, an analyst at Commerzbank AG in Frankfurt. “There’s also an expectation that Peugeot will move to find a partner.”

Le Figaro reported that France, which has a seat on the carmaker’s board, plans to hire an investment bank as an adviser. The newspaper didn’t say where it got the information.

Spanish Utilities

In Spain, the government announced plans to cut profit for renewable energy companies and the electric grid operator as part of Prime Minister Mariano Rajoy’s effort to eliminate a 4.5 billion euro deficit forecast this year for the industry.

Iberdrola SA, Spain’s biggest power company, fell 3.4 percent to 3.87 euros. Endesa SA slumped 4.6 percent to 16 euros, while Acciona SA, which owns more than 4 gigawatts of wind farms in the country, tumbled 8.5 percent to 37.95 euros. Red Electrica Corp. slid 7.5 percent to 38.34 euros.

Reckitt Benckiser Plc declined 5.1 percent to 4,677 pence after CVS Caremark Corp. removed the film version of the company’s opiod-dependency drug Suboxone from its list of covered medications, jeopardizing sales and profits at a unit that makes up one-fifth of Reckitt’s earnings.

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