M&A rush, strong earnings see European stocks close at new highs

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 29, 2021. REUTERS/Staff/File photo

By Sruthi Shankar and Ambar Warrick

(Reuters) -European stocks ended at a new peak on Monday, as increased dealmaking activity and a batch of strong financial sector earnings helped markets mark a strong start to August.

The pan-European STOXX 600 index rose 0.6% to end at a record closing high of 464.45 points, with retail and technology stocks serving as the best performers.

British aero-engineer Meggitt (LON:MGGT) soared 56.7% to the top of the STOXX 600, hitting a record high after U.S. industrial firm Parker-Hannifin said it would buy the UK rival in a deal valued at $8.76 billion.

Among other deals, British asset management services provider Sanne Group jumped 7.6% after it said it could get a takeover bid from fund servicer Apex Group.

German real estate firm Vonovia rose 2.2% as it launched a sweetened, 19.1 billion euro ($22.7 billion) bid to buy rival Deutsche Wohnen.

Axa, Europe's second-largest insurer, gained 4.2% after it posted a 180% surge in first-half net income.

German rival Allianz (DE:ALVG) tumbled 7.8% after U.S. regulators started a probe relating to Allianz Global Investors' Structured Alpha Funds.

Asia-focussed lender HSBC edged 0.3% lower, even after it beat forecasts for first-half pretax profit and reinstated dividend payments.

Of the more than half of the STOXX 600 companies that have reported second-quarter results so far, 67% have topped profit estimates, as per Refinitiv IBES data.

"Having reached all-time highs post 1Q results, the breadth of positive EPS revisions in Europe remains very strong both in absolute terms and versus peers," European equity strategists at Morgan Stanley (NYSE:MS) said in a note. "Europe now sees the best earnings revisions of all global regions."

Optimism around European earnings and economic reopening helped the benchmark STOXX 600 end July with a sixth straight month of gains despite concerns about inflation, soaring virus cases in Asia and a major regulatory crackdown in China.

Meanwhile, a survey showed manufacturing activity across the euro zone continued to expand at a blistering pace in July, but supply bottlenecks sent input costs soaring.

British jet and auto parts supplier Senior Plc (LON:SNR) jumped 9.3% after it reported a first-half profit compared with a loss a year earlier.

Peer Melrose gained 5.2%, while Rolls-Royce (LON:RR) added 3.8% .

The world's second-largest brewer Heineken inched up 0.6% after reporting first-half earnings above expectations, but warned rising commodity costs would eat into margins.

German carmaker Daimler rose 1.5% after Goldman Sachs (NYSE:GS) added the stock to its conviction list.

($1 = 0.8415 euros)