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Europe Markets: European equities return to record highs, with German stocks boosted by $22 billion property deal

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European stocks marched further into the green on Tuesday, surpassing record highs notched in early May, as Germany’s main stock market index was boosted by a $22 billion deal between two property giants.

The pan-European Stoxx 600
SXXP,
+0.39%

lifted 0.4% and Frankfurt’s DAX
DAX,
+0.73%

rose 0.8% as both indexes hit record highs. In London, the FTSE 100
UKX,
-0.07%

was trading around flat while the CAC 40
PX1,
+0.02%

in Paris was 0.1% higher.

Dow industrials futures
YM00,
+0.28%

were pointing up around 80 points, set for a positive open to extend gains, after the index rallied 186 points on Monday to close at 34,393.

Analysts noted that macro forces shaping markets remained largely unchanged, with the focus in Europe increasingly turning to easing COVID-19 restrictions. Inflation concerns remain in investors’ minds and continue to shape messages from central banks.

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“Inflation jitters have continued to subside among investors for now, with expectations of future Fed hikes over 2021 and 2022 moving back slightly once again yesterday following their increase after the U.S. CPI [consumer-price index] reading for April,” said strategists at Deutsche Bank
DB,
+2.04%
,
led by Jim Reid.

Paul Donovan, the chief economist at UBS Global Wealth Management, noted that inflation remains a focus but central banks globally are reiterating calming messages for markets.

“Yesterday, it was the Bank of England’s turn to point out that current price rises are transitory and narrowly focused. Economists and central bankers clearly support a ‘don’t panic’ strategy. Some investors see inflation around every corner,” Donovan said.

Boosting spirits in Europe was German business sentiment, measured by the Ifo business-climate index, which came in at 99.2 points for May compared with 96.6 in April — the highest point in two years. Expectations were for the index to notch 98 points.

Also read: German business climate rises to two-year high in May, Ifo says

Adding buoyancy to German markets, shares in property company Deutsche Wohnen
DWNI,
+15.49%

soared more than 15%, after rival Vonovia said it had agreed to acquire the group in a cash deal worth around €18 billion ($22 billion). Both companies are constituents in the DAX index. 

Shares in Vonovia
VNA,
-4.24%
,
which is Europe’s largest residential property group, dropped 4%. The deal for Deutsche Wohnen, at €53.03 per share, values the group at a near-18% premium to the stock price before the agreement was announced. Deutsche Wohnen stock hasn’t traded above €50 per share since 2007, before the 2008-09 financial crisis.

Industrial software group Aveva’s
AVV,
+4.27%

stock rose 4%, after the group’s full-year financial results outpaced expectations on both sales and earnings. One of the U.K.’s oldest technology companies, analysts at Swiss bank UBS
UBS,
+0.69%

noted that Aveva showed a strong margin and that its recovery from the COVID-19 pandemic seemed under way.

Shares in Argo Blockchain
ARB,
+14.41%
,
a London-listed cryptocurrency miner, rose more than 12%, after the group said it has joined the new Bitcoin Mining Council to promote transparency around energy usage and accelerate sustainability initiatives. The crypto space, and bitcoin
BTCUSD,
-1.85%

in particular, has come under fire from critics including electric-vehicle company Tesla’s
TSLA,
+4.40%

chief executive Elon Musk over its environmental impact.

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