European stock rally fades despite M&A surge and Wall Street gains

European stocks closed higher on Monday but gave back earlier gains driven by vaccine hopes and a flurry of M&A activity.

The Stoxx Europe 600 index SXXP, +0.14% rose 0.2% after ending last week nearly 1.7% higher, the best weekly return since the week ending August 7. The French CAC 40 FR:PX1 rose 0.4%, but the German DAX DAX, -0.07% and the FTSE 100 index UKX, -0.09% fell 0.1%.

Investors will hear from the Federal Reserve, the Bank of England and the Bank of Japan in the coming days in a busy week for central bank meetings.

European stocks faded in the afternoon despite a strong start on Wall Street. The Dow Jones Industrial Average DJIA, +1.38% climbed 1.4%, or 377 points, in early trading, while the S&P 500 SPX, +1.62% was 1.7% up and the Nasdaq COMP, +1.99% was 2.4% higher.

Renewed hopes over a coronavirus vaccine also helped improved sentiment at the beginning of the week.

Pfizer Inc.’s PFE, +3.28% chief executive officer Albert Bourla said in an interview Sunday that the drug maker should know if its COVID-19 vaccine candidate will work by the end of October — and if approved, it could be distributed in the U.S. by the end of the year. Pfizer is partnering with German drug maker BioNTech BNTX, +4.74% on the vaccine’s development.

Oxford University also announced Saturday it would resume a trial for the coronavirus candidate it’s developing with AstraZeneca AZN, -0.34%. The study was halted last week following a U.K. patient falling ill pending a review into the “unexplained illness.” Oxford University said it has been deemed safe to continue. Shares of AstraZeneca rose 0.5%.

U.S.-based Gilead Sciences Inc. GILD announced a $21 billion deal on Sunday to buy biotech Immunomedics Inc. IMMU, maker of a key breast-cancer drug.

Japanese technology conglomerate SoftBank Group Corp. announced a $40 billion deal late Sunday to sell U.K.-based microprocessor designer Arm Holdings to chipmaker Nvidia NVDA, +5.50% for a mix of cash and stock.

The technology sector was also lifted by M&A, with shares of chip equipment maker ASML Holding NV ASML, +2.14% ASML, +0.89% up 0.9%.

And the race for TikTok is heating up. Software group Oracle Corp. ORCL, +4.99% had been tipped to take over the video-sharing app’s U.S. after China’s ByteDance apparently rejected an offer from technology giant Microsoft Corp. MSFT, +1.55% But in the latest twist, Chinese state media say ByteDance has turned down Oracle as well.

Elsewhere, Euronext NV ENX, -2.45% said Monday that it has submitted a non-binding offer to acquire Borsa Italiana from London Stock Exchange Group PLC LSE, -0.77%. The pan-European exchange partnered with Italian lenders Cassa Depositi e Prestiti Equity and Intesa Sanpaolo SpA ISP, -0.01% on the offer. Euronext shares slipped 2.5% and London Stock Exchange shares fell 0.8%.