Europe Stocks Rise as M&A Activity Offsets Stimulus Fear

European stocks advanced, snapping a two-day decline, as merger and acquisition activity outweighed concern that central banks will taper stimulus measures. U.S. futures climbed while Asian shares were little changed.

Kabel Deutschland Holding AG jumped 7.7 percent after Vodafone Group Plc confirmed that it approached the German company about a takeover. British Sky Broadcasting Group Plc rose 1.7 percent as analysts said News Corp. may make another offer for the company. Severn Trent Plc tumbled after a consortium of investors dropped their bid for the water utility.

The benchmark Stoxx Europe 600 Index gained 0.3 percent to 292.69 at 10:08 a.m. in London. The gauge has lost 5.8 percent since May 22 amid speculation the Federal Reserve will taper its bond-buying program that helped drive the measure to its highest level since June 2008.

"I've been waiting for M&A for so long; companies have strong balance sheets so that they have the wherewithal to do it, but it's whether they have the confidence," Kevin Lilley, a fund manager at Old Mutual Asset Managers U.K. in London, which oversees about $6.1 billion, said in a telephone interview. "I would expect to see more activity in the coming months."

The MSCI Asia Pacific Index retreated 0.1 percent today, after a rout that wiped out about $400 billion from the value of global equities yesterday. Contracts on the Standard & Poor's 500 Index futures advanced 0.4 percent after the equity gauge fell for a second day.

German Hearing

Germany's top court continues its two-day hearing to address the European Central Bank's Outright Monetary Transactions program and the European Stability Mechanism. The ECB's top two German officials yesterday gave opposing evidence at the Federal Constitutional Court in Karlsruhe as judges consider the legality of the OMT bond-buying program.

"There is the realization in the market that some of the stimulatory measure out there are going to be coming t! o an end," said Lilley. "Fears of a worst-case scenario have abated for now, but for the market to really move ahead we need profit growth."

Greece became the first developed country to be cut to emerging-market status by MSCI Inc. after the local equity gauge plunged 83 percent since 2007.

The Mediterranean nation failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability, according to a statement yesterday from MSCI, whose equity indexes are tracked by investors with about $7 trillion in assets.

Kabel Approach

Kabel Deutschland rallied 7.7 percent to 80.51 euros, for the biggest advance on the Stoxx 600, after Vodafone, the world's second-largest wireless carrier, confirmed it discussed acquiring the German cable operator to expand in the broadband and TV market.

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Vodafone contacted Kabel Deutschland, which has a market value of about 7 billion euros ($9.3 billion), to discuss an offer within the past week, Bloomberg News reported yesterday, citing people with knowledge of the matter. Vodafone slipped 1.2 percent to 182.9 pence.

BSkyB rose 1.7 percent to 791 pence. Banco Espirito Santo SA wrote in a report that News Corp. may make a new bid for the U.K.'s largest pay-TV broadcaster after its shareholders approve a plan to split off publishing operations. Espirito said it sees a possible takeover valuation for BSkyB of 990 pence a share.

Severn Trent tumbled 7.8 percent to 1,786 pence after Borealis Infrastructure Management Inc. and its Kuwaiti-British partners late yesterday abandoned their 5.3 billion-pound ($8.3 billion) bid for the U.K. water utility as the offer deadline expired.