By Kit Rees
LONDON (Reuters) - European shares bounced off six-month lows on Tuesday as the focus shifted from politics to dealmaking and earnings, with paper and packaging stocks soaring after Smurfit Kappa rejected a bid approach.
Telecom Italia (MI:TLIT) jumped around 5 percent after Bloomberg reported that activist investor Elliott Management was building a stake, in a move to challenge the way top shareholder Vivendi (PA:VIV) is managing the company.
The pan-European STOXX 600 (STOXX) index was up 0.8 percent by 0954 GMT, while Italy's benchmark (FTMIB) recouped all of its losses from the previous session, up 1.1 percent, as concerns over political uncertainty following an inconclusive election result eased.
"Italy is going to be so ... tied up for months that in a way it's almost a blessing because there will not be any ability to do anything unconventional. In a way that is quite comforting for the market," Ken Odeluga, market analyst at City Index said.
"(Italy seems) to have a knack for pulling out a political solution which the markets can live with and that's happened time and time again."
Germany's DAX (GDAXI) was particularly buoyant, rising more than 1 percent, led higher by autos stocks Volkswagen (DE:VOWG_p), Daimler (DE:DAIGn) and BMW (DE:BMWG) which have been hit by concerns over an imminent trade war after U.S. President Donald Trump proposed imposing tariffs on steel and aluminum.
Those worries have dissipated slightly as Trump faces a growing pushback from political and diplomatic allies as well as U.S. companies.
European autos (SXAP) were the best-performing sector on the day, up 1.8 percent and putting the industry back into positive territory for the year, along with tech stocks (SX8P).
Paper and packaging maker Smurfit Kappa (I:SKG) jumped 18 percent after rejecting an approach from International Paper (N:IP). Peers DS Smith (L:SMDS) and Mondi (L:MNDI) both rose around 5 percent.
"With a coordinated global fight against the use of plastics, the sector could well be ripe for consolidation," said Mike van Dulken, head of research at Accendo Markets.
A number of stocks sustained heavy losses after giving earnings updates.
Just Eat (L:JE) slumped 9.5 percent after saying that a planned increase in spending in 2018 would hit core earnings.
Aggreko (L:AGGK), a temporary power provider, dropped nearly 11 percent after reporting an 11.8 percent fall in full-year profit. Likewise Swiss security firm Dormakaba (S:DOKA) fell 5.8 percent after its half year results, in which it forecast slower organic sales growth.
(GRAPHIC: European Sectors YTD Price Performance - http://reut.rs/2D3oOP2)
