European shares near eight-month highs as Micro Focus surges

European stock markets gained ground on Thursday, leaving a leading index near eight-month highs, with software company Micro Focus surging after a deal with Hewlett Packard Enterprise.

The pan-European STOXX 600 index was up 0.2 per cent, near its highest level in eight months.

Micro Focus rose around 20 pe rcent, the best-performing stock on the STOXX 600 index, after sealing an $8.8 billion deal for Hewlett Packard Enterprise to merge its non-core software assets with Micro Focus’s business.

However, Rocket Internet fell 5 per cent after the German e-commerce investment company cut the valuation of its Home24 online furniture business.

Many investors were also focusing on a European Central Bank meeting later in the day.

Expectations of more pledges to help the sluggish euro zone economy from ECB president Mario Draghi have pushed down bond yields, which in turn has driven investors over to the better returns available from stocks and company dividends.

"Draghi isn't anywhere near to achieving his goals, and he might very well continue to assure the market that there might be more to come and that he still has tools available to boost growth," said Markus Huber, trader at City of London Markets Limited.

The euro zone economy is widely expected to need more stimulus from the central bank, but it may not come at the bank’s policy meeting on Thursday.

Growth and inflation remain weak, but the ECB has already exhausted much of its firepower, so Draghi has to pick his time and probably has enough arguments to wait a bit longer.

Nonetheless, it is probably just a matter of months before the ECB eases policy further, acknowledging that inflation is not moving higher, despite free credit to banks, record-low interest rates and money printing worth €1.2 trillion in the past year and a half.

The STOXX 600 index is down around 4 per cent so far in 2016, although it has rallied over the last two months from lows reached back in June after Britain's shock 'Brexit' vote to quit the European Union.

Reuters