Banks, BP among strongest advancers; Ericsson shares slip
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — European equity markets posted solid gains Tuesday, led by a sharp rise for many U.K. stocks as the London market reopened after a public holiday.
The Stoxx Europe 600 index (ST:STOXX600 280.75, +2.73, +0.98%) rallied 1% to 280.85, extending Monday’s gains.
Gains for banks and oil giant BP PLC (UK:BP. 495.45, +29.90, +6.42%) (BP 46.21, +1.06, +2.35%) helped lift the U.K.’s benchmark index (UK:UKX 6,028, +128.19, +2.17%) to its highest level in about two and a half years. The FTSE 100 was lately up 2.2% to 6,030.80. Also see London Markets.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said markets tend to perform well in the first few days of a new year as money often flows in from investment funds and pension funds.
This year, that trend may be particularly strong as the investment shift to equities from bonds is continuing, he noted.
U.S. stocks were broadly steady in early Wall Street trading. In the previous session, upbeat reports on manufacturing and construction activity helped boost stocks to two-year highs.
Stephen Pope, managing partner at Spotlight Ideas, said he expects the U.S. economy to “surprise to the upside” in 2011, but that economic growth in the developed world will remain moderate compared with emerging markets.
With the likes of China and India set to drive growth, Pope highlighted the energy, infrastructure and metal/mining sectors as among his top picks for the year.
“This will, in my opinion, be another strong year for equities, with 10%-plus gains being made on the major developed markets,” he noted.
Mining stocks rose Tuesday, with Xstrata PLC (UK:XTA 1,527, +21.00, +1.40%) surging 3.3%, while bank stocks were also among the strongest performers.
Royal Bank of Scotland Group PLC (UK:RBS 40.84, +1.77, +4.53%) (RBS 12.72, +0.15, +1.19%) advanced 4.7% after it was upgraded to outperform from neutral at Exane BNP Paribas, which said worries over the impact of Ireland’s debt crisis have been overdone.
Other U.K. banks also got a lift as they caught up with gains made by European rivals Monday. Barclays PLC (UK:BARC 273.30, +11.65, +4.45%) (BCS 17.09, +0.32, +1.92%) rose 3.8%, and Lloyds Banking Group (UK:LLOY 68.32, +2.62, +3.99%) (LYG 4.21, +0.04, +0.96%) added 3.6%.
Among the other major indexes, the French CAC 40 (FR:PX1 3,924, +22.65, +0.58%) climbed 0.8% to 3,930.41, and the German DAX 30 (DX:DAX 6,989, -0.75, -0.01%) edged up 0.1% to 6,998.75.
Among the peripheral markets, Ireland’s ISEQ rose 0.8% to 2,906.79, and Portugal’s PSi 20 index was up 1.1%.
The Greek ASE Composite, however, dropped 1.8% as shares in Piraeus Bank weighed on the market. The lender slumped more than 15% in Athens after it announced plans to raise over 800 million euros by selling new shares at a 43% discount to their recent price.
In other markets, Italy’s Fiat SpA (IT:F 7.44, +0.41, +5.84%) was a strong performer, jumping 7% as Morgan Stanley initiated coverage of the firm with an overweight rating a day after it began to trade separately from Fiat Industrial SpA (IT:FI 8.85, -0.16, -1.72%) (IT:FI 8.85, -0.16, -1.72%)
Shares in Fiat Industrial, which the broker rated at equal-weight, slipped 0.9%.
Other auto firms were mixed, with BMW (DE:BMW 61.20, -0.11, -0.18%) dropping 0.5%, giving back some of the previous session’s strong gains.
Europe’s oil majors were higher Tuesday, led by a 7% gain for BP after the Daily Mail newspaper reported that rival Royal Dutch Shell (UK:RDSA 2,164, +25.50, +1.19%) (RDS.A 67.44, +0.36, +0.54%) had weighed a takeover bid in the wake of the Gulf of Mexico oil spill. (BP 46.22, +1.07, +2.36%) Shares of Shell rose 1.5%, while Total (FR:FP 41.20, +0.61, +1.50%) rose 2.1% in Paris.
The gains also came as crude-oil prices ticked slightly higher, and as The Wall Street Journal reported that energy firms may soon be able to resume drilling in deep water in the Gulf of Mexico, according to a plan announced Monday by the Obama administration.
Among other stocks in focus, shares of Carrefour (FR:CA 32.58, +0.53, +1.65%) rose 2.1% after the French retail giant was upgraded to buy from hold at Bank of America Merrill Lynch, which said a recent selloff in the stock was overdone.
Other supermarket chains also had a good session, with Germany’s Metro AG (DE:MEO 55.87, +0.89, +1.62%) up 0.9% and Tesco PLC (UK:TSCO 431.45, +6.45, +1.52%) rising 1.7% in London.
On the downside, shares in Ericsson (SE:ERICB 76.60, -2.35, -2.98%) dropped 2.5% after the telecom-equipment group was downgraded to neutral from outperform by analysts at Credit Suisse. The broker said that while infrastructure fundamentals look set to gradually improve, there are more compelling opportunities in the likes of Research In Motion (RIMM 58.87, -0.07, -0.12%) , Qualcomm Inc. (QCOM 50.94, +0.76, +1.52%) and Motorola Mobility Holding Inc. (MMI 32.94, +2.70, +8.93%) .
