European Stocks Advance; International Power, Cadbury Lead Gain

By Adria Cimino

Jan. 18 (Bloomberg) -- European stocks gained, with the Dow Jones Stoxx 600 Index rebounding from its first weekly loss in a month, amid speculation acquisitions may pick up after last year’s slump. Asian shares dropped.

International Power Plc jumped the most in five months after people familiar with the plan said GDF Suez SA is considering a tie-up with the biggest U.K.-based electricity producer. Cadbury Plc rose 1.7 percent after a report that Kraft Foods Inc. will increase its bid for the chocolate maker. Cie. Financiere Richemont SA, the world’s largest jewelry maker, added 1.1 percent after sales climbed. Titan Cement Co. led Greek stocks lower as European Union finance ministers meet.

The Dow Jones Stoxx 600 advanced 0.6 percent to 258.02 at 9:52 a.m. in London. The Stoxx 600 has rallied 63 percent since March, boosted by record-low interest rates in the U.S. and Europe and about $12 trillion committed by governments worldwide to revive the economy.

“M&A is a theme we’ve entered into our portfolios,” said Louis de Fels, a Paris-based money manager at Raymond James Asset Management International, which oversees $29 billion. “We favor stocks that will acquire sales through takeovers. This theme will develop in Europe and these stocks will continue to perform.”

The MSCI Asia Pacific Index lost 0.5 percent, snapping four weeks of gains. U.S. stocks fell last week, pulling the Standard & Poor’s 500 Index down from a 15-month high, after profits at Alcoa Inc. and JPMorgan Chase & Co. disappointed investors and China took steps to slow economic growth. The U.S. stock market is closed today for the Martin Luther King Jr. holiday. Futures on the S&P 500 added 0.2 percent.

International Power Increases

International Power rallied 7.7 percent to 346.9 pence, the biggest intraday gain since August, and GDF Suez rose 1.8 percent to 28.86 euros. GDF Suez is considering a tie-up with International Power that may lead to a partnership with the U.K. electricity producer, two people familiar with the plan said.

Any deal between the two may not necessarily lead to GDF Suez taking control of the U.K. company, although no final decision has been made, the people said, declining to be identified because the talks are private. Christel des Royeries, a spokeswoman for GDF Suez, declined to comment to Bloomberg News, as did Beth Akers, a spokeswoman for International Power.

Cadbury, Kraft

Cadbury gained 1.7 percent to 807 pence. Kraft will raise its bid for Cadbury to at least 820 pence a share from 771 pence, the Sunday Times reported, without saying where it got the information. Kraft must raise its offer to at least 850 pence a share, according the median price named in a Bloomberg News survey of nine Cadbury shareholders, who together account for about 11 percent of the shares.

Global mergers and acquisitions are poised for a “modest” rebound this year after companies cut debt and analysts trimmed earnings estimates, KPMG said today. Acquisitions dropped about 37 percent last year to $1.75 trillion, less than half of 2007’s record $4.04 trillion, according to data compiled by Bloomberg.

Richemont climbed 1.1 percent to 36.88 Swiss francs after sales growth resumed as the rich spent more on Cartier necklaces and IWC watches. Revenue gained to 1.59 billion euros ($2.3 billion) in the three months ended Dec. 31 from 1.55 billion euros a year earlier, the maker of IWC and Jaeger-LeCoultre watches said. Analysts had estimated a decline in sales to 1.51 billion euros, according to the median of 17 estimates.

Greek Stock Fall

Greece’s ASE Index slid 2.2 percent, on course for the lowest close in eight months, as finance ministers from the 16 nations that use the euro meet in Brussels. Concern about the Greek government’s worsening finances last month prompted Fitch Ratings, Moody’s Investors Service and S&P to cut the country’s credit rating.

A Greek default would dwarf those of Argentina and Russia and risk a “vicious circle” of contagion in Europe, according to Jim Reid of Deutsche Bank AG. Greece has double the debt that Russia and Argentina had combined when they defaulted in 1998 and 2001, according to data compiled by Bloomberg.

Titan Cement, Greece’s largest cement maker, sank 3.6 percent to 20 euros. Alpha Bank SA, the country’s third-biggest bank, tumbled 4.5 percent to 7.40 euros.

Basic resources shares gained the most among the 19 industry groups in the Stoxx 600 as copper, lead and nickel rose in London.

Kazakhmys Plc, the largest copper producer in Kazakhstan, advanced 2.6 percent to 1,446 pence. Xstrata Plc, the world’s largest exporter of power-station coal, added 2.4 percent to 1,217 pence. Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, climbed 2.2 percent to 1,047 pence.

Zodiac, L’Oreal

Zodiac Aerospace jumped 5 percent to 29.31 euros, ending a four-day drop. The maker of aircraft seats and automotive components was upgraded to “buy” from “underperform” at BofA Merrill Lynch Global Research.

L’Oreal SA increased 1.6 percent to 78.88 euros. The world’s biggest cosmetics maker was lifted to “buy” from “hold” at Deutsche Bank, which said the company will “reap the rewards” after investing in brands during the economic downturn.

Home Retail Group Plc added 1.8 percent to 265.9 pence. The owner of Argos catalog stores in the U.K. was raised to “buy” from “sell” at ING Groep NV.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.