European stocks advanced on Monday, edging higher as China moved to limit the fallout from the coronavirus halting activity in the world’s second-biggest economy.
The Stoxx Europe 600 SXXP, +0.34% increased 0.33% to 431.96. U.S. markets are closed in observance of Presidents Day, though U.S. stock futures ES00, +0.22% traded higher in electronic trade.
China took another step to boost its economy, with the People’s Bank of China cutting its one-year lending rate, as the country announced it may postpone its annual congress in March. China’s finance minister also said the country is planning targeted tax cuts. The Shanghai Composite SHCOMP, +2.28% surged over 2%.
Analysts at Morgan Stanley say European companies are on track to deliver positive earnings per share growth in the fourth quarter for the first time in a year. “This is an impressive result in our opinion given soft comparisons don’t really come into play for the aggregate index until the first-quarter 2020 earnings season,” the bank’s analysts said, adding that earnings momentum may be dependent on the coronavirus.
Faurecia EO, +6.53% shares rose 6.8% as the French auto parts company said it would outperform global automotive production by 1 to 2 percentage points this year, which is stronger than its previous forecast of 1 to 1.5 percentage point outperformance. Its net profit in 2019 slumped to €590 million from €701 million the previous year, while sales inched up 1.4% to €17.77 billion.
Shares in Bayer BAYN, -1.01% slipped 1.9% and BASF BAS, -0.93% fell 1% as the companies were ordered to pay $265 million to a Missouri peach farmer who said the companies’ herbicide drifted from nearby farms onto his property and hurt his orchard. Both companies are appealing.
“We don’t expect this new scandal to cost as much as the glyphosate scandal may, but the timing for Bayer is not the best,” said Jean-Jacques Le Fur, an analyst at brokerage Bryan, Garnier & Co.
Alstom ALO, +3.50% rose 3.8% as the company reached a tentative pact to buy Bombardier’s train business for more than $7 billion.
Jupiter Fund Management JUP, +3.66% jumped 3.7% as the company said it was proposing to buy Merian Global Investors, which manages £22 billion in assets, for £370 million of stock as well as up to £20 million more in deferred payments. Jupiter said the cost synergies from the deal for Merian will lead to low to mid-teen accretion to underlying earnings per share in 2021, as its total assets under management will grow to £65 billion. Analysts at Berenberg estimate Jupiter is paying 11 times earnings for Merian, which is a 23% discount to listed European asset managers.
