Sanofi-Aventis and cars lift European shares

European shares rose for the 10th straight session yesterday, fuelled by a surge in French drugmaker Sanofi-Aventis and a rebound in car stocks on upbeat earnings forecasts.

Sanofi-Aventis shares shot up 8.4 per cent after the company, together with Bristol-Myers Squibb Co, settled a dispute with generic drugmaker Apotex Inc. that could keep patent protection on their multibillion-dollar blood thinner Plavix until 2011.

"The news on Sanofi is the big driver," said Simon Jeffries, head of sales trading at ING Barings.

"The proposed settlement with Apotex now sees us raise the probability of US Plavix enjoying patent protection to 2011 from 50 per cent to 90 per cent," Credit Suisse said in a note.

"This effectively sees us raise our P/E premium the shares trade on against the French market from five per cent to 9.5 per cent, which equates to raising our share price target from €73 to €79," Credit Suisse said.

Seymour Pierce analyst Sav Neophytou said the deal was a "significant positive" for the sector and showed branded drug firms were finding ways to see off generic challenges.

The DJ EuroStoxx health care sector index rose 1.5 percent with AstraZeneca up 1.2 per cent.

The pan-European FTSEurofirst 300 index ended unofficially with a gain of 0.33 per cent to 1,378.09 points.

The index, which rose to a near five-year high of 1,379.6 points in intraday trade earlier this week, is up more than 7.5 per cent this year, propelled by mergers and acquisitions and robust earnings.

Prospects of continued profit growth helped car stocks rise more than two per cent on the sector index.

BMW rose 5.8 per cent, with a top executive telling Reuters the German carmaker's first quarter so far had gone "superbly".

Volkswagen (VW) rose 4.5 per cent and Citigroup raised its price target on the stock to €70 from €59, saying in a note that it saw "significant potential for earnings to show further progress" after 2008.

"We think very little of the potential to restore returns on the 47 billion euros of currently profitless turnover in VW is priced in," Citigroup said.

Takeover speculation saw selected stocks trade higher, with ITV up 9.4 per cent after a newspaper report that the UK broadcaster had received an approach from private equity company Apax Partners and Goldman Sachs.

GUS gained 3.4 per cent on talk that the UK retailing and financial company had rejected a seven billion pound bid approach for its Experian credit rating division.

Vivendi Universal advanced 3.3 per cent after newspapers said two investors were building a stake in the media group with the aim of getting a say over its strategy and pushing the conglomerate to sell assets.

Among declining stocks, Metro lost 3.3 per cent after Germany's biggest retailer managed to increase profits only marginally in 2005 and gave a cautious outlook for 2006.

Dresdner Kleinwort Wasserstein (DrKW) said Metro's "2006 guidance appears lacklustre" and reiterated its "reduce" rating.

"The lack of operating leverage that the sales and EPS guidance implies for the group in 2006 looks disappointing," DrKW said in a note.

HSBC traded ex-dividend and was down 2.3 per cent, and Goldman Sachs predicted subdued prospects for the UK bank.

"We see three headwinds for the business - a flat yield curve, loan book seasoning and cost investment," Goldman Sachs said in a note.

"The flat yield curve, with HSBC Finance's average duration of its funding shorter than its assets, is likely, in our view, to continue to impact margins," it said.

UniCredito fell 1.7 per cent even though the Italian bank's 2005 earnings beat the average of analysts' forecasts. The stock had risen more than 4.5 per cent since March 7.