By Carla Mozee
LONDON--European stocks advanced Tuesday, with the pan-European benchmark hanging at a six-year high, but AstraZeneca PLC shares were stuck in the red after Pfizer Inc. officially walked away from its pursuit of the British drug maker.
The Stoxx Europe 600 index closed up 0.2% at 344.47 after a 0.6% run higher on Monday following European parliamentary elections.
European markets were additionally buoyed by "further dovish remarks" by European Central Bank President Draghi who "highlighted the risk of a negative spiral between low inflation, falling inflation expectations and credit for the euro area," said Guillermo Felices at Barclays asset allocation research, in a note Tuesday. "We retain our call that the ECB will cut its policy rate and/or announce targeted liquidity measures to support bank lending," at the Governing Council's meeting on June 5.
On Tuesday, Belgium, the first euro-zone country to report inflation data for May, said growth in consumer prices dropped to the lowest level in more than four years, with an inflation rate of 0.36%. The Belgium BEL 20 stock index rose 0.3% to 3,153.97.
There were strong gains in the European parliamentary elections, which ended Sunday, for anti-European Union and far-right parties, reflecting widespread voter frustration over economic austerity and lackluster growth. Overall, centrist, pro-European parties are poised to hold a majority of the 751 seats in the legislature.
Investors "took the electoral success in stride. The duopoly of the center-right and center-left will persist and still dominate the EU parliament," said currency analysts at Brown Brothers Harriman in a report Tuesday. "This will likely become clearer when the new [European Commission] president and commission are put together," they said. "The anti-EU vote is far from a unitary bloc. They are a disparate collection of national parties."
Germany's DAX 30 index turned higher by 0.5% to 9,940.82, and France's CAC 40 index moved up 0.1% to 4,529.75.
Aveva Group surged 8.8%, the best performer on the Stoxx 600, after the British engineering data and design IT systems company posted a 9% rise in 2014 pretax profit.
Trading resumed in the U.K. after Monday's Bank holiday. The FTSE 100 rose 0.4% to 6,844.94, led by InterContinental Hotels Group. Its shares climbed 3.1% after the owner of Holiday Inns, Crowe Plaza and other hospitality chains reportedly said over the weekend it rejected a £6 billion bid ($10.12 billion) from an unnamed U.S. company.
But AstraZeneca PLC dropped 1.8% after Pfizer Inc. officially walked away from its offer to buy the British drug maker for $120 billion.
The increased bid came four weeks from the confirmation of Pfizer's first offer, which was also rejected by AstraZeneca. U.K. takeover rules gave the firms until Monday to enter takeover discussions. Societe Generale cut its rating on AstraZeneca to sell from hold, and Panmure Gordon lowered its price target on the company, according to Dow Jones Newswires.
Meanwhile, Russian stocks were knocked lower as dozens of pro-Russian separatists were killed by Ukrainian forces in heavy fighting at Donetsk International Airport. On Sunday, pro-Europe chocolate baron Petro Poroshenko was elected as Ukraine's new president. The blue-chips MICEX index fell 2.5%, and the RTS index gave up 2.9%.
The political crisis in Ukraine slashed Russian lender VTB Bank's first-quarter profit by 98% to 400 million rubles ($11.7 million).
Italy's FTSE MIB index tilted lower by 0.4% to 21,403.55 after swinging between gains and losses. The index had been higher following a report that consumer confidence in the country in May rose to its highest level since January 2010.The MIB index on Monday rallied 1.8%, led by bank stocks, after Italian Prime Minister Matteo Renzi's center-left Democratic Party defeated a challenge from a euroskeptic party headed by comedian Beppe Grillo.
Write to Carla Mozee at [email protected]