Nestle, Italian bank deal prop up European shares

* STOXX up 0.6 pct

* Banks rise as Italy solves Veneto banks crisis

* Nestle rallies as activist investor urges changes

* German business confidence rises to record

* Oil bounce also supports market
(Adds details, updates prices)

By Danilo Masoni

MILAN, June 26 (Reuters) – European shares rose on Monday as
banks rallied after Italy reached a deal to wind up two failed
regional banks and Nestle climbed to a new record after an
activist investor urged changes at the consumer bellwether.

Italy began winding up two failed Veneto region banks on
Sunday in a deal that could cost taxpayers up to 17 billion
euros but puts an end to a long-running crisis and leaves the
lenders’ good assets in the hands of Intesa Sanpaolo.

“The announcement of definitive steps to resolve the two
Veneto banks should be seen as a positive for Italian banks and
the broader sector (albeit at a high cost),” said Jefferies
analyst Benjie Creelan-Sandford.

“Intesa, as acquiror of the ‘good’ assets, also looks to be
getting a good deal,” he added.

Shares in Intesa, Italy’s largest retail bank, rose 3.2
percent while the euro zone bank index rose 1.3 percent.

Gains in bank stocks helped the pan-European STOXX 600
and the euro zone blue chip indexes rise
0.6 and 0.7 percent respectively, while UK’s FTSE added
0.6 percent.

Further supporting sentiment was a survey showing that
German business confidence unexpectedly rose in June to a record
high, a fresh sign that company executives are more upbeat about
the growth outlook of Europe’s largest economy.

The German blue chip index added 0.6 percent.

Nestle led STOXX gainers, up 4.3 percent. Activist
investor Daniel Loeb’s Third Point unveiled a stake of more than
1 percent, urging the group to improve its margins, buy back
stock and sell its stake in L’Oreal.

UBS said despite its scale, Nestle lagged its rivals in
profitability and that the move could put pressure on its CEO to
take tangible steps to accelerate value creation. L’Oreal rose
4.1 percent.

Gains in Nestle also gave a lift to sector peers such as
Danone, Unilever and Diageo, sending
the European food and beverage index up 1.9 percent and
on track for its strongest day this year.

Higher oil prices propped up the energy sector, the worst
performing this year, with majors such as BP and Total
leading the charge.

Underscoring the broadly upbeat mood across markets,
safe-haven utilities were the only sector in the red by
mid morning, falling 0.1 percent.

Among top STOXX fallers were William Hill and
Zalando, both down more than 2 percent following
downbeat broker notes.

(Reporting by Danilo Masoni; Editing by Robin Pomeroy)


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