9-27-17 1:06 PM EDT | Email Article

By Sara Sjolin, MarketWatch

Alstom climbs after Siemens rail deal

European stocks advanced for a fifth straight session on Wednesday, with banks rising on expectations of higher U.S. interest rates and Alstom shares rallying after its rail merger with Siemens.

The Stoxx Europe Index added 0.4% to end at 385.62, marking its highest close since July 17, according to FactSet data.

Alstom-Siemens deal: Helping the pan-European benchmark move higher on Wednesday were shares of Alstom (ALO.FR) , which leapt 4.3%, and Siemens AG (SIE.XE)(SIE.XE) , which climbed by 1.2%.

The companies agreed to merge their rail operations (http://www.marketwatch.com/story/alstom-siemens-to-merge-creating-rail-giant-2017-09-26), aiming to create a European giant with the scale to fight growing competitive threats from state-backed Chinese rivals.

"Siemens-Alstom targets annual synergies of EUR470 million after four years, which looks overly ambitious, in our view," analysts at Deutsche Bank said in a note.

"Unlike car making, economies of scale are not significant in train production and many smaller tier-2 suppliers have actually proven very successful at winning tenders," they added.

Indexes: The Siemens advance helped drive Germany's DAX 30 index up 0.4% to 12,657.41.

Meanwhile, France's CAC 40 index ended 0.3% higher at 5,281.96. Alstom isn't listed in the benchmark French index.

In the U.K., the FTSE 100 index rose 0.4% to 7,313.51 (http://www.marketwatch.com/story/ftse-100-set-to-break-2-day-losing-run-as-pound-slides-miners-rise-2017-09-27), getting a boost from a weaker pound .

Spain's IBEX 35 index rose 1.8% to 10,368.90, for now shrugging off concerns about Catalonia's independence referendum set for Sunday. The government in Madrid has said the vote is illegal and has ordered police deployed at polling stations to prevent people from voting, according to news reports.

Read:Disputed Catalonia independence referendum set for Oct. 1 (http://www.marketwatch.com/story/german-election-result-revives-eurozone-jitters-as-investors-turn-attention-to-spain-2017-09-25)

Euro slide: The euro fell to a one-month low against the dollar, fetching $1.1742 compared with $1.1795 late Tuesday in New York. The shared currency started falling on Monday after the German election, in which Chancellor Angela Merkel secured a fourth term nonetheless saw her party register a sharp drop in support.

The euro slide was then exacerbated by a rally in the dollar after Federal Reserve Chairwoman Janet Yellen on Tuesday reaffirmed expectations for a rate increase later in 2017 (http://www.marketwatch.com/story/yellen-says-fed-should-be-wary-of-raising-rates-too-gradually-2017-09-26), saying it would be "imprudent" to leave monetary policy on hold until inflation hits the central bank's target.

The Yellen comments were also positive for banks, which typically do better in periods of higher interest rates as they can charge more for their loans. Hopes that U.S. President Donald Trump will announce a substantial tax overhaul (http://www.marketwatch.com/story/trump-republicans-to-propose-scrapping-state-and-local-deduction-in-tax-overhaul-2017-09-27) later on Wednesday also helped the dollar and the financial sector, as it could provide the backbone for greater monetary tightening, analysts said.

"Despite the question marks over if and when Trump's tax plans will take hold, the fact is that this at least provides a greater degree of confidence within the Fed that their stimulating mantle is going to be carried via fiscal means, thus lessening the importance of easy monetary policy," said Joshua Mahony, market analyst at IG, in a note.

The Stoxx Europe 600 Banks Index jumped 2% on Wednesday, its biggest one-day percentage gain since early July.

Stock movers: Shares of Telefonica SA (TEF) gained 3% after Berenberg upgraded the Spanish telecom firm to buy from hold, according to Dow Jones Newswires.

Ryanair Holdings PLC (RYAAY) climbed 3.9%. The budget carrier said it's canceling another 18,000 flights (http://www.marketwatch.com/story/ryanair-cuts-flight-load-to-protect-pilot-leave-2017-09-27) between November and March to "eliminate all risk of further flight cancellations." The airline earlier September canceled around 2,100 flights for the autumn because it had messed up on pilots' vacations.

Shares of Novo Nordisk AS (NOVO-B.KO) (NOVO-B.KO) added 0.6% after the drugmaker said its Tresiba treatment has been approved by the China Food and Drug Administration to treat diabetes in China.

Fortum Oyj (FORTUM.HE) rose 0.9% after launching an EUR8 billion takeover offer for Uniper SE (http://www.marketwatch.com/story/fortum-makes-official-takeover-offer-for-uniper-2017-09-27)(UN01.XE). Uniper shares fell 0.6%.

Shares of Electrolux AB (ELUXY) lost 4% after Goldman Sachs downgraded the Swedish home-appliance maker to neutral from buy.

Outside the Stoxx 600, shares of Carillion PLC (CLLN.LN) soared 21% after reports a Middle Eastern bidder is preparing a takeover for the U.K. construction-projects company.

 

(END) Dow Jones Newswires

September 27, 2017 13:06 ET (17:06 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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