Insurers push European stocks to 6-year highs

Gains for insurers helped push European stocks to fresh six-year highs on Monday, although the advance was limited by a retreat in the drugs sector.

The FTSE Eurofirst 300 index rose 6.65 points, or 0.4 per cent, to 1,550.36.

Credit Suisse and UBS both raised their price targets while Merrill Lynch upped its rating from “neutral” to “buy”.

JPMorgan, meanwhile, described the stock as the “cheapest big-cap in Europe” as it raised its forecast for 2008 earnings per share by 15 per cent. Allianz rose 3 per cent to €169.

Axa also remained in favour following its own sparkling set of figures last week, and its shares added 2.7 per cent to €34.42.

Merrill Lynch reiterated its “buy” stance on the stock with a price objective raised from €37.20 to €39.

In the reinsurance sector, Scor launched a hostile $2bn bid for the shares it does not already own in Switzerland’s Converium.

Last week, Converium rejected a merger approach from Scor, saying the offer price was too low, after the French company bought nearly a third of the shares for SFr21 each.

For every Converium share, the French company is now offering 0.5 new Scor shares plus SFr4 in cash, which is equivalent to SFr21.10 a share.

Scor fell 2.7 per cent to €20.65 while Converium ended 0.9 per cent higher at SFr21.80.

Elsewhere in the sector, Swiss Re rose 3.1 per cent to SFr108.80 and Munich Re added 2.5 per cent to €128.54. Both companies are due to report later this week.

Oil stocks were broadly higher following a spike in crude prices. Total added 1.5 per cent to €53.66 and Eni rose 1.9 per cent to €24.20.

But there was pain for investors in the pharmaceuticals sector after three of Europe’s leading companies were beset by clinical and regulatory problems.

Novo Nordisk fell 5.4 per cent to DKr485.50 after the Danish group abandoned plans to sell its Novo Seven drug as a treatment for brain haemorrhages after disappointing clinical trial results.

Dresdner Kleinwort retained its “sell” rating on the stock and cut its target price from DKr400 to DKr380, and also recommended switching into Bayer, up 1 per cent to €45.07.

“We continue to argue that Bayer provides much of the same defensive characteristics in the sector,” said analyst Tero Weckroth. “Specifically, both companies are free of major patent expiries over the next few years and have high exposure to biologicals. But in contrast to Novo, one can buy into Bayer at a cheap valuation.”

Meanwhile, Novartis fell 1.7 per cent to SFr70.95 after the US Food and Drug Administration requested additional data on the company’s Galvus diabetes drug.

“In a worst case scenario, the FDA’s request for clinical data could delay Galvus’ approval by two years,” said Alexandra Hauber at Bear Stearns, adding: “Galvus represents 3 per cent of our 2010 group operating profit forecast.”

Roche also suffered after it suspended enrolment into clinical trials of its Mircera anaemia treatment. The shares slipped 0.9 per cent to SFr222.50.

Real estate stocks also came under selling pressure. Metrovacesa led the way with a drop of 8 per cent to €93.50, as sentiment towards the Spanish stock remained weak following last Monday’s announcement that the company would be split in two.

Rodamco Europe, the Dutch property group, fell 5.7 per cent to €110.10 after its full-year results disappointed the market.

Elsewhere, Arcelor Mittal, the world’s biggest steelmaker, rose 3.9 per cent to €41.01 amid ongoing talk about further consolidation in the industry.

Ericsson, the Swedish telecoms equipment group, gained 0.4 per cent to SKr26 after offering SKr9.8bn for Norway’s Tandberg Television.

As part of the Swedish group’s drive into internet protocol television, the offer represented an 18 per cent premium to Tandberg’s volume-weighted average over the last three months, and was 10.4 per cent higher than a bid from Arris Group of the US. Tandberg shares climbed 11.7 per cent to NKr112.