Merger cheer, Sanofi lift European shares; Fed in focus

(Reuters) - European shares recovered from early losses on Monday, fueled by a surge in the London Stock Exchange Group on its potential deal to buy financial data firm Refinitiv, while investors waited anxiously for an expected U.S. interest rate cut.

A logo of Sanofi is pictured during the company's shareholders meeting in Paris, France, April 30, 2019. REUTERS/Benoit Tessier

Shares of LSE LSE.L surged 14.6% to an all-time high after the exchange operator said it was in discussions to buy Refinitiv Holdings from U.S. buyout fund Blackstone Group BX.N for $27 billion, including debt.

That helped London's FTSE .FTSE rise 1% and outperform major European peers, with other deal talks and weakness in the British pound also supporting the blue-chip index.

Britain's Just Eat JE.L soared 25.3% on news that it was in talks to be bought by rival online food delivery firm TKWY.AS in a potential 8.2-billion-pound ($10.1 billion) all-share deal.

The pan-European stocks benchmark index .STOXX was up 0.2% by 0818 GMT at the start of a week that is expected to be dominated by meetings at major central banks.

The U.S. Federal Reserve is widely expected to lower rates this Wednesday for the first time in a decade, but investors will look for clues on its future rate plans. Last week, European Central Bank chief Mario Draghi disappointed investors with less-dovish-than-expected remarks.

Stocks have rallied since a steep fall in May on hopes that major central banks would ease monetary policy to stave off any further slowing in global growth as trade war risks persist.

Meanwhile, the Bank of England on Thursday is expected to swim against the tide of looser policy sweeping major central banks and keep alive the prospect of future rate hikes.

U.S. and Chinese trade negotiators will meet in Shanghai this week for their first in-person talks since a G20 truce last month, but expectations are low for a breakthrough.

“The upside is there won’t be any new tariffs in the short to medium term,” said Michael Hewson, chief market analyst at CMC Markets UK.

“But U.S. President Donald Trump has got what he wanted, which is a Fed rate cut. I don’t think we are going to make any significant progress (on trade talks) before the year end.”

Trade sensitive auto stocks .SXAP fell 0.8%, the most among the major sectors.

Healthcare stock were mixed with Sanofi SASY.PA rising 2.8% after boosting its 2019 outlook, while Novartis NOVN.S dropped 1.3% as a trial for a new use of its Entresto heart drug failed.

Heineken HEIO.AS slumped 5.3% after the world's second largest brewer missed estimates for first-half profit.

Reporting by Susan Mathew in Bengaluru; Editing by Saumyadeb Chakrabarty