Huge pharma sector manoeuvres boost European stocks

Huge deal-making in the pharmaceutical sector gave European stocks a shot in the arm on Tuesday, even though tension over the crisis in Ukraine lurked in the background, traders said.

Shares in European pharmaceutical groups surged owing to a major reshaping of the sector, driven by Novartis of Switzerland and GlaxoSmithKline in London.

London's FTSE 100 gained 0.85 percent to 6,681.76 points compared to Thursday's closing level -- the last trading day before European markets closed for Easter.

Germany's DAX 30 soared 2.02 percent to 9,600.09 points while the CAC-40 in Paris gained 1.18 percent to 4,484.21 points.

The euro rose against the dollar.

Wall Street was also firm, with the Dow Jones main index showing a gain of 0.59 percent and the Nasdaq index advancing 0.92 percent.

"The pharma sector stood out... on the back of news that two of the biggest players in the sector are making major changes to their business models," said Farhan Ahmad, a trader at TradeNext.

At ETXCapital, strategist Ishaq Siddiqi said: "In Europe, worries about the crisis in Ukraine heating up are certainly not helping risk-sentiment but financial market participants are generally feeling upbeat on the back of some high-profile deal activity in the pharma sector."

Market traders were also concerned about the outlook for growth in China, he said.

The latest takeover activity comes against a background of rising interest in acquisition opportunities in general, as businesses emerge from post-crisis risk-averse years with strong balance sheets and full war chests.

Another point of interest is the return of Portugal on Wednesday to regular long-term bond issuance on its road to an expected exit from its EU-IMF bailout programme next month.

Swiss pharmaceutical giant Novartis and British group GlaxoSmithKline (GSK) announced a major shake-up of their healthcare divisions on Tuesday in deals worth billions of dollars.

It comes as reports over the weekend suggested that US pharmaceutical giant Pfizer was considering a $100-billion takeover of British rival AstraZeneca.

"Pharmaceutical stocks have had a shot in the arm... on rumours of an impending takeover for AstraZeneca," said Mike McCudden, head of derivatives at stockbroker Interactive Investor.

In London deals, AstraZeneca's share price shot 4.72 percent to 3,960 pence and GSK rallied 5.20 percent to 1,640 pence.

- Healthcare joint venture -

Novartis closed up 2.28 percent to 76.40 francs after announcing that it would buy GSK's oncology, or cancer treatment, business for $16 billion (11.5 billion euros) in cash and sell its vaccines division, excluding vaccines for flu, to the British company for up to $7.1 billion, also in cash.

The two companies also announced a joint venture to create "a world-leading consumer healthcare business", focused on wellness, oral health, nutrition and skin health and expected to pull in around $10 billion in annual sales.

Asian stock markets closed mixed, even though Wall Street had provided another strong lead.

Wall Street had jumped for a fifth straight session on Monday, by 0.25 percent, thanks to solid earnings reports. Attention is now on results expected this week from top firms including McDonald's, United Technologies and AT&T.

In foreign exchange deals on Tuesday, the euro rose to $1.3795 from $1.3793 late in New York on Monday.

The European single currency fell to 82.00 British pence from 82.13 pence, while the pound advanced to $1.6821 from $1.6791 on Monday.

On the London Bullion Market, the price of gold fell to $1,282.50 an ounce from $1,299 on Thursday.