Europe close: Transatlantic M&A props up stocks

Stocks finished in the black on Tuesday but well of their best levels of the session despite a powerful rally on Wall Street the day before and after a rare inter-meeting interest rate cut by the Federal Reserve.

Rate-setters in Washington lowered the target range for short-term official interest rates by 50 basis points to 1.0-1.25%, as a few analysts had anticipated.

But as often happens in such cases, investors appeared to "read between the lines" (while anticipating further rate cuts) that authorities were indeed quite concerned, while in the background there was talk of a global recession should the coronavirus spread to Asia, Europe and the US.

"The markets are likely to enter a "we want more" mode, and that is the primary risk at this point," analysts at Jefferies said shortly after the Fed announced its decision.

"Where there are actual outbreaks, leaders may face the choice between economic ruin and taking maximum measures to save lives. The moral high ground there is complex, as economic ruin by itself could cost many lives," chipped in their peers at Rabobank.

By session's end, the benchmark Stoxx 600 had added 1.37% to trade at 381.13, alongside an advance of 1.08% for the German Dax to reach 11,985.39 while Spain's Ibex 35 had pared its gains to finish up 0.80% at 8,811.6.

In parallel, the yield on the benchmark 10-year Bund was down by one basis point to -0.63% and front month Brent crude oil futures had slipped 0.14% to $51.83 a barrel on the ICE.

Euro/dollar meanwhile was up 0.29% at 1.11679.

But Jefferies also saw some opportunities in the wake of the most recent dislocations in stockmarkets.

"While the full impact of COVID-19 is currently difficult to measure, the recent dislocation in equity markets may offer potential opportunities," the broker said - and some US corporates, in particular, seemed to be listening.

And analysts at ShoreCap continued to believe that a full-blown epidemic could still be avoided.

Shares of German wholesaler Metro AG topped the Stoxx 600 leaderboard after Bloomberg broke news that US food distribution giant Sysco had made "fresh overtures" in recent weeks.

Coronavirus diagnostic test marker Qiagen NV was right behind accepting a takeover bid from Thermo Fisher Scientific valued at €9.0bn.

Shares of Lufthansa and IAG also rose sharply.

Italian lender Banco BPM on the other hand was the worst performer after unveiling its strategic plan for 2020-23.

On a related note, analysts at Goldman Sachs marked down their estimate for Stoxx 600 earnings growth in 2020 to "recession levels", from -2% to -6% on the back of their now lower growth projections for the US (from 2.2% to 1.3%), euro area (from 1% to 0.3%) and China (from 5.5% to 5%).

Regarding the G7's policy statement, following a 30 minute conference call, policymakers from the US, Japan, Germany, UK, France, Italy and Canada issued a statement saying: "G-7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase.

"G-7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system."

But some traders had been hoping for a more detailed response.