March 12, 2018 / 8:52 AM / 7 months ago

German utilities' overhaul supports European stocks

MILAN (Reuters) - European shares hit their highest level in almost two weeks on Monday, boosted by gains among German utilities after the sector’s leading players announced a major overhaul of the industry.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 12, 2018. REUTERS/Staff/Remote

Shares in utilities in other countries rose on optimism for further M&A in the sector.

The STOXX utility index .SX6P rose 1.1 percent to lead sectoral gainers in Europe, helping the pan-European STOXX 600 index to close up 0.2 percent at its highest since Feb. 28.

Germany's DAX .GDAXI was up 0.6 percent, while the UK's FTSE .FTSE dipped 0.1 percent on weaker commodity stocks.

There was little economic data during the session and investors were awaiting U.S. inflation data on Tuesday to assess how fast the Federal Reserve will raise interest rates this year.

Innogy (IGY.DE) was the best performing stock, soaring 12 percent after parent RWE (RWEG.DE) and rival E.ON (EONGn.DE) said they would break up Germany’s largest energy company by market value and divide up its assets.

RWE and E.ON posted the second and third biggest gains, rising 9.2 percent and 5.3 percent respectively.

The deal would give E.ON greater economies of scale in power distribution and retail and RWE in renewables, making it easier for them to cope with Germany’s rapid shift to cleaner energy sources.

Morgan Stanley said the agreement could be a win-win deal, with larger networks and retail businesses for E.ON and a long term renewables strategy and a stable dividend for RWE.

Another gainer was German fashion house Hugo Boss (BOSSn.DE) which broker Exane upgraded to “outperform” from “neutral”.

The autos sector index .SXAP rose 0.4 percent, brushing off a tweet by President Donald Trump in which he threatened to impose taxes on European vehicles imported into the United States if the EU retaliates in a row over steel tariffs.

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Meanwhile, basic resources stocks .SXPP retreated 0.2 percent, tracking lower metal and crude oil prices.

Reporting by Danilo Masoni; editing by Tom Pfeiffer, Jon Boyle and David Stamp

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