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European shares inched higher on Friday, buoyed by a $47-billion tobacco buyout plan and some well-received earning updates from companies, including Europe’s largest software maker SAP.
British American Tobacco rose 2.6 per cent after it had offered to buy US tobacco group Reynolds American to create the world’s biggest listed cigarettes company.
Analysts welcomed the possible deal saying it could boost BAT’s earnings after cost savings estimated at $400 million and strengthen its grip on the key US market.
“In strategy terms, the key is simply scale,” analysts at Berenberg said in a note.
“Reynolds American and BAT have a technology agreement and cooperate on many issues so this is largely about taking control of a significant share of the world's largest profit pool.”
By 0828 GMT, the pan-European STOXX 600 index was up 0.1 per cent, building on a two-week high hit in the previous session when dovish remarks from European Central Bank chief Mario Draghi further weakened the euro.
The index was also supported by some well-received earnings updates, including from SAP, car parts supplier Valeo and fertiliser firm Yara.
However, the overall picture was mixed. European third-quarter corporate earnings are seen falling 13 per cent, as any recovery remains elusive, with the energy and financial sectors seen taking the biggest hits, according to Thomson Reuters I/B/E/S/ data.
SAP rose 2.9 per cent after Europe’s biggest software company raised the lower end of its 2016 operating profit forecast range, anticipating a strong fourth quarter due to healthy orders for its products.
Valeo rose 3.9 per cent, leading gainers on the STOXX index, as it lifted its 2016 profitability target after posting a 16 per cent gain in third-quarter sales.
Yara rose 5.9 per cent after core profit and revenues at the Norwegian based group fell less than expected in the third quarter.
Daimler , however, fell 2.5 per cent after the German car maker kept its forecast for a slight rise in adjusted full-year EBIT but trimmed its forecasts for sales volume.
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