European stocks finished firmly in the green Monday, underpinned by a rally in J Sainsbury PLC shares after enthusiasm around merger news offset losses among resource companies. Most major European bourses also logged solid monthly gains.
What are markets doing?
The Stoxx Europe 600 index (STOXX:XX:SXXP) was up 0.2% to end at 385.32, rising for the third session in a row. For the month, the pan-European index nabbed a gain of 3.9%, it is best monthly return since December 2016, cutting its year-to-date drop to 1%.
The U.K.’s FTSE 100 index (FTSE:UK:UKX) rose 0.1% to finish at 7,509.30, boosted by the surge in Sainsbury’s shares and a continued decline in the pound (XTUP:GBPUSD) . The FTSE logged its best monthly climb, up 6.4%, since July of 2013.
Germany’s DAX 30 index (XEX:DX:DAX) was up 0.3% to close at 12,612.11, with a monthly advance of 4.3% and marking its best month since September.
Meanwhile, France’s CAC 40 index (PAR:FR:PX1) added 0.7% to end at 5,520.50, climbing 6.8% in April, for the best month since October of 2015.
The euro (XTUP:EURUSD) bought $1.2075, compared with $1.2131 late Friday in New York.
What is driving the market?
Supermarket shares were among the big movers on Monday after J Sainsbury PLC (LON:UK:SBRY) agreed to merge with Walmart Inc.’s (NYS:WMT) U.K. business, Asda Group Ltd., creating a company with combined revenue of around £51 billion ($69 billion).
The deal values Asda at about £7 billion, and Walmart will hold 42% of the combined business and will receive £3 billion as part of the transaction. After the merger is complete, Walmart will hold 29.9% of voting rights for the new company.
Shares of Sainsbury’s jumped 14.5% after the deal news for the Stoxx Europe 600’s largest rise, while major competitor Tesco PLC (LON:UK:TSCO) (OTC:TSCDY) lost 0.9%.
Commodity prices also drove activity on European equity markets on Monday. Crude-oil prices lost ground after a rise in U.S. rig count data out on Friday pointed to an increase in production stateside, but were recently little changed. Metals prices were mixed after earlier moving mostly lower.
The Stoxx Europe 600 Basic Resources Index (STOXX:XX:SXPP) fell 1.1%, while the Stoxx Europe 600 Oil & Gas index (STOXX:XX:SXEP) was up 0.1%, as an earlier drop faded.
What are strategists saying?
“Seemingly coming out of nowhere, Sainsbury’s and Asda confirmed the weekend’s reports that they intend to merge, a move that would see the green-orange hybrid leapfrog Tesco as the U.K.’s biggest supermarket in terms of market share,” said Connor Campbell, financial analyst at Spreadex, in a note.
“Obviously regulators are going to have a LOT to say about such a landscape-shifting deal, meaning there’s a long way to go before this bonkers but potentially brilliant marriage becomes a reality,” he added.
Other share movers
Shares of WPP PLC (LON:UK:WPP) (NYS:WPP) jumped 8.6% after the advertising giant posted earnings that outstripped forecasts.
Accor SA (PAR:FR:AC) rose 2% after the hotel operator said it is buying Movenpick Hotels & Resorts for 560 million Swiss francs ($566.5 million) in cash.
On a downbeat note, Skandinaviska Enskilda Banken AB (OME:SE:SEB.A) dropped 4.5% after the Swedish bank posted a drop in first-quarter profit.
Glencore PLC (LON:UK:GLEN) (OTC:GLCNF) fell 5% after two of the miner’s businesses in the Democratic Republic of the Congo on Friday were served freezing orders for around $3 billion.
Deutsche Telekom AG (FRA:DE:DTE) slipped 0.3% after the boards of Sprint Corp. (NYS:S) and T-Mobile US Inc. (NAS:TMUS) agreed to an all-stock $26 billion merger. Deutsche Telekom is T-Mobile’s parent company and will own 42% of the combined entity.
German retail sales unexpectedly declined in March, falling 0.6% month-on-month. Staying in Germany, preliminary inflation data for April showed consumer prices didn’t change this month compared with March, but rose 1.6% compared with April last year.
Meanwhile, data showed Italian inflation fell to 0.6% in April from 0.9% in March.