European Stocks Advance for Third Day; Cairn Energy, Aviva Gain

Cairn Energy rose 2.4 percent after Vedanta Resources Plc agreed to buy a stake of as much as 60 percent in the company’s Indian oil unit. Source: Cairn Energy via Bloomberg

European stocks climbed for a third day, rebounding from the biggest weekly decline in more than a month, as takeover bids boosted Cairn Energy Plc and Aviva Plc. Most Asian shares fell while U.S. index futures rose.

Cairn Energy rose 2.4 percent after Vedanta Resources Plc agreed to buy a stake of as much as 60 percent in the company’s Indian oil unit. Aviva gained 1.5 percent after rejecting an offer from RSA Insurance Group Plc for its general insurance businesses in the U.K., Ireland and Canada.

The benchmark Stoxx Europe 600 Index rose 0.5 percent to 256.73 at 8:18 a.m. in London. The gauge fell 1.2 percent last week after the U.S. Federal Reserve said the pace of recovery in the world’s largest economy will probably be “more modest” than forecast. The Stoxx 600 is still up 11 percent from this year’s low on May 25 as corporate earnings eased concern that the economy may tip back into recession.

The MSCI Asia Pacific Index was little changed today as Japan’s economy expanded at the slowest pace in three quarters and Hong Kong announced measures to cool home prices. Japan grew at less than a fifth of the pace economists estimated last quarter, pushing it into third place behind the U.S. and China and adding to evidence the global recovery is faltering.

Standard & Poor’s 500 Index futures gained 0.4 percent before a report that may show manufacturing in the New York region expanded at a faster pace in August.

Cairn, Vedanta

Cairn Energy rose 2.4 percent to 479.5 pence after Vedanta said it agreed to buy 51 percent to 60 percent of the company’s Indian oil unit for an aggregate consideration of about $8.5 billion to $9.6 billion in cash. Shares of Vedanta advanced 3 percent to 2,114 pence.

Aviva climbed 1.5 percent to 393.1 pence after rejecting the RSA bid, saying that the best value for shareholders will come from retaining the general insurance businesses.

“Given the compelling strategic and financial benefits to Aviva shareholders of retaining the GI Business, its upside potential and the terms offered by RSA, the board was unanimous in rejecting this proposal,” Aviva Chairman Colin Sharman wrote in a statement.

The Sunday Times reported that Aviva shareholders, including Standard Life Investments, will demand a full strategic review and possible breakup of the company, without saying where it got the information. Standard Life declined to comment when contacted by telephone yesterday.

RSA Rights Offer

Sky News reported on its website that RSA has lined up BNP Paribas SA, HSBC Holdings Plc and Deutsche Bank AG to underwrite a 5 billion-pound rights offer.

Hennes & Mauritz AB rallied 3.6 percent to 236.4 kronor after Europe’s second-largest clothing retailer said same-store sales excluding currency movements rose 10 percent in July, the fastest pace in more than two years.

Hochtief AG increased 5.4 percent to 52.29 euros after Germany’s largest construction company forecast its order book will grow this year, buoyed by expansion overseas and gains in the Australian and U.S. dollars.

The inflow of new work will exceed 2009 levels, the company said in a statement. Exchange rate moves inflated first-half orders by 6 billion euros ($7.7 billion). Hochtief reiterated sales will be similar to last year, with pretax profit increasingly “slightly.”