* FTSEurofirst 300 up 1.8 pct
* D.Telekom's $39 bln T-Mobile USA sale lifts telcos
* Fears ease over Japanese nuclear crisis
By Harpreet Bhal
LONDON, March 21 (Reuters) - Gains in telcos led European
shares to a one-week closing high on Monday after Deutsche
Telekom sold its T-Mobile USA unit for $39 billion, fuelling
expectations of a further pick-up in mergers and acquisitions.
The pan-European FTSEurofirst 300 <> index of top
shares ended up 1.8 percent at 1,107.89 points, its highest
close in a week, with the STOXX Europe 600 telecommunications
index <.SXKP> gaining 3.7 percent.
Deutsche Telekom <DTEGn.DE> surged to a two-year high after
selling its unit to U.S firm AT&T <T.N> in the world's biggest
M&A deal this year, and said it would return cash to
shareholders and refocus on organic growth. []
Analysts expect the equity market to be supported by growing
expectations of further M&A deals in Europe this year as the
economic recovery gathers pace.
"Confidence in M&A is going to return. Companies have
healthy balance sheets and M&A seems to be a natural way forward
especially for those companies that can borrow cheaply," said
Ana Armstrong, chairman at Distinction Asset Management.
"Telecoms have the biggest weight in our funds because
they're cash-rich, pay high dividends and have low levels of
debt. To spend their cash to either buy back their own stock or
to acquire somebody else makes a lot of sense."
In a confirmation of a revival in the European M&A market,
deals proceeds doubled on a year-over-year basis to $172.7
billion in the first quarter to March 18, 2011, with proceeds up
around 2 percent in the same period compared with the previous
quarter, according to Thomson Reuters Propriety Research.
Traders said signs of progress in resolving Japan's nuclear
crisis also helped boost risk appetite, after engineers restored
electricity to three reactors at the Fukushima plant and planned
to test water pumps at the damaged facility []
"The market hates uncertainty and the issues in Japan are
easing which is helping," Colin McLean, managing director at
fund group SVM Asset Management in Edinburgh, which has 700
million euros ($992.5 million) assets under management.
Insurers were on the rise, with the STOXX Europe 600
insurance index <.SXIP> up 2.5 percent, recouping some hefty
losses from last week when it shed 3.9 percent on uncertainty
over the impact of the Japanese earthquake and tsunami.
However, traders said some caution among investors prevailed
as western forces launched a second wave of air strikes on
oil-rich Libya, which drove Brent crude prices <LCOc1> to over
$115 a barrel. []
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Interactive timeline of market impact of recent events
http://r.reuters.com/saj68r
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BULLISH OUTLOOK
Technical analysis suggested further upward movement for
euro zone blue chip stocks on the STOXX Europe 50 index
<>, which has rebounded from a 3-1/2 month low to gain
for the third straight session. The index closed up 2.4 percent
at 2,860.81 points.
"The close of the gap in a lot of European markets, between
2,822 and 2,845 in the Euro STOXX 50 Index, is bullish and
suggests further upside potential in the coming days," said
Roelof-Jan van den Akker, senior technical analyst at ING
Commercial Banking.
Fund managers also expect to see more gains for equities,
saying money was flowing back to equities from bonds and some
short positions were being covered.
"The current environment is good for equities. Fundamentals
look reasonably good and there are companies which are well
placed to benefit from rising inflationary expectations and
moderate economic recovery," said Felicity Smith, fund manager
at Bedlam Asset Management, which manages $700 million.
"The alternatives look less attractive and money is coming
out of bonds because government finances look pretty stretched."
(Additional reporting by Atul Prakash and Joanne Frearson;
Graphic by Scott Barber; Editing by David Cowell)
