European share prices steadied on Monday as fresh political concerns in Spain weighed, although merger and acquisition (M&A) activity underpinned broader regional benchmarks. Madrid's main market index fell 0.3 percent, while the broader pan-European STOXX Europe 600 index fell 0.2 percent and London's commodity-heavy FTSE 100 index added 0.4 percent.
Spain's Socialists on Sunday chose former leader and hardliner Pedro Sanchez to head the party again, a vote likely to make it harder for the ruling conservatives to secure the opposition support it needs in parliament to push through legislation. "Although Sanchez was gaining traction over the past week the result comes as a surprise and could introduce political risk again into the Spanish investment case," Exane analysts said. "We can expect a short-term negative market reaction," they added.
Financials, which tend to be particularly sensitive to politics, were the biggest fallers in Madrid. Banco Popular, Bankia and Santander were down by between 1.3 and 3.2 percent. The euro zone bank index was down 1 percent. Strategists at Credit Suisse had downgraded Spanish stocks as the momentum of strong economic data and corporate results moderated.
Clariant ended 3.5 percent higher after the Swiss company and US peer Huntsman agreed a merger to create a chemical manufacturer with a market value of over $14 billion.
Baader Helvea analyst Markus Mayer said he viewed the deal as a defensive move and that Clariant's share price could be boosted not only by potential synergies but also the chance of a rival bid. "Clariant is the No 1 takeover target in the sector with a long list of interested parties ... (the) merger announcement might be the trigger for interested parties now to come up with a (hostile) takeover bid," he wrote in a note.
Aegon jumped 6.5 percent after the Dutch-based insurer said it would sell some US operations to boost its financial strength. Analysts welcomed the terms of the deal, which they said also removed the risk of a possible capital increase.
LafargeHolcim was among top gainers after it named Sika boss Jan Jenisch as its new CEO, ending the cement maker's search for a leader after a scandal over payments in Syria. Sika's share price was among the worst-performing, down 4 percent. UCB plummeted 18 percent, suffering its worst day's losses in 30 years, after the drugmaker and US biotech firm Amgen said their experimental osteoporosis drug was unlikely to win US approval this year due to safety concerns.
Four out of five European companies have released their latest results so far, pointing to first-quarter earnings growth of 17.9 percent, according to Thomson Reuters I/B/E/S Estimates data. Even though growth has slowed from the more than 20 percent previously expected, the picture remains strong with 66 percent of the companies beating analysts' expectations and 7 percent meeting them.