German utilities overhaul boosts European stocks

European shares rose in early trading on Monday to their highest in almost two weeks, boosted by gains among German utilities after the sector’s leading players announced a major overhaul of the industry.

Innogy soared 16 percent after parent RWE and rival E.ON said they would break up Germany’s largest energy company by market value and divide up its assets.

The deal would give E.ON greater economies of scale in power distribution and retail and RWE in renewables, making it easier for them to cope with Germany’s rapid shift to cleaner energy sources. RWE and E.ON, whose share prices collapsed over the past decade, rose 11 and 4.6 percent respectively.

Shares in utilities in other countries rose on optimism for further M&A in the sector.

The Stoxx utility index rose more than 2 percent to lead sectoral gainers in Europe, helping the pan-European STOXX 600 index rise by 0.4 percent by 0812 GMT to its highest since Feb. 28.

Germany’s DAX was up 0.8 percent, while the UK’s FTSE rose 0.6 percent.

Among top gainers were GKN, after Melrose increased its hostile bid for the UK automotive engineer, appealing to investors after the company struck a rival deal of its own last week.

The autos sector index rose 0.7 percent, brushing off a tweet by U.S. President Donald Trump in which he threatened to impose taxes on European autos imported into the U.S. if the EU retaliates in a row over steel tariffs.

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