PARIS/LONDON (Reuters) - European shares held near fresh seven-year highs hit on Thursday, weighed down by Sabadell after it made a bid for TSB, although better than expected earnings reports supported the market.
Spain’s Banco de Sabadell fell 6.6 percent after making a takeover bid that valued British bank TSB at around $2.6 billion. TSB rose 24 percent.
“Sabadell can diversify away from the Spanish market with this deal, so it could be good for them. But they have to set aside the cash, and it’s a new market for them, so a bit of an unknown,” said Jasper Lawler, market analyst at CMC Markets.
“European banks still need strong balance sheets, and maybe acquisitions aren’t the conservative approach investors are looking for.”
Shares in German potash and salt miner K+S gained 7.5 percent and Dutch marine engineering company Boskalis added 5 percent after reporting better than expected results.
As Europe’s earnings season draws to an end, Thomson Reuters StarMine data shows that companies have reported a 15.9 percent rise in quarterly profits as European firms start to reap the benefits of a weaker euro. That the biggest rise in European earnings since mid-2011 and well ahead of a 6.8 percent rise in U.S. quarterly profits.
At the close, the FTSEurofirst 300 index of top European shares was flat at 1,574.72 points.
The index hit a fresh seven-year high of 1,581.42 points earlier in the session, following on from a 1.5 percent rise on Wednesday that had been fuelled by a drop in the euro.
The single currency has fallen by about 25 percent against the dollar over the past year, giving a major boost to European companies as roughly 50 percent of euro zone earnings come from outside the region.
Analysts have said every drop of 10 percent in the euro against a basket of currencies should translate into a 6 to 8 percent rise in European profits.
The euro has extended its losses since the European Central Bank started its quantitative easing campaign this week, accentuating the monetary policy divergence between the euro zone and the United States.
“Draghi is achieving his goal so far, and he’s getting help from the United States, and the potential for higher rates there,” said Veronika Pechlaner, European equity fund manager at Ashburton.
“We think exporters will benefit most from the euro weakness, as well as those with dollar earnings, such as healthcare. That’s where we’re overweight.”
Euro zone shares lagged on Thursday, with the Euro Stoxx 50 down 0.2 percent.
The UK’s FTSE 100 index was up 0.6 percent, while Germany’s DAX index was down 0.1 percent after hitting a record high, and France’s CAC 40 also fell 0.1 percent.
Editing by Catherine Evans