By Aude Lagorce, MarketWatch
LONDON (MarketWatch) — European shares traded in a tight range Monday as the financial sector weighed and several companies, including Vivendi SA and Rio Tinto PLC, contemplated deals.
The Stoxx Europe 600 index (ST:STOXX600 270.99, +0.05, +0.02%) rose marginally to 271.07 in late morning trading.
The index closed down 0.3% on Friday after a lower-than-expected increase in U.S. nonfarm payrolls rekindled worries over the state of the global economy. The labor report, however, came at the end of a good stretch for the Stoxx 600, which snapped a three-week losing streak to post weekly gains of 1.6%.
Among the main regional indices on Monday, France’s CAC 40 index (FR:PX1 3,739, -11.35, -0.30%) fell 0.3% to 3,738.11, and the U.K’s FTSE 100 (UK:UKX 5,758, +12.95, +0.23%) was flat at 5,748.20. Germany’s DAX 30 (DX:DAX 6,949, +1.30, +0.02%) inched 0.1% higher to 6,954.53.
The financial sector was under pressure once again, with shares of Societe Generale (FR:GLE 38.44, -0.86, -2.18%) down 1.5% in Paris and Deutsche Bank AG (DE:DBK 38.12, -0.68, -1.75%) (DB 50.69, -1.51, -2.89%) , losing 2% in Germany.
Among the peripheral markets, Spain’s IBEX 35 (XX:IBEX 9,917, -97.60, -0.98%) lost 0.9% and Italy’s FTSE MIB slipped 0.8%.
“There won’t be any end-of-year rally in equity markets. Our view is that we will trade sideways in a volatile pattern, the way we have in recent days,” said Christoph Riniker, head of strategy research at Julius Baer.
“Institutions are starting to close the books. The trading volumes are historically much lower in the second half of December,” he added.
In the new year Riniker believes German equities will continue to outperform, thanks in part to German firms’ exposure to emerging markets and the low-interest-rate environment. He recommended staying away from so-called peripheral markets for now.
Concerns that Portugal and Spain may soon follow in the footsteps of Greece and Ireland and seek financial assistance from authorities have eased a bit in recent days, allowing markets to recover briefly.
But halting the spread of the sovereign debt crisis remains firmly at the top of European leaders’ agenda.
Euro-zone finance ministers are meeting in Brussels Monday to discuss whether their 750 billion euro ($997 billion) rescue fund may need to be increased. European Central Bank President Jean-Claude Trichet last week hinted they should consider such a move.
Over the weekend several U.K. newspapers reported that the International Monetary Fund is preparing to call on EU authorities to boost the fund and step up bond purchases.
Data on the ECB’s latest bond-buying activity is due later Monday and expected to show an increase towards €10 billion ($13.3 billion), which would be a substantial increase from recent weeks.
Ericsson, Vodafone in focus
In the telecom sector, shares of Ericsson AB (SE:ERICB 73.70, -0.95, -1.27%) (ERIC 10.96, +0.34, +3.20%) declined 1% after the equipment specialist announced that its chairman would step down in 2011 or 2012.
On the operator side, shares of U.K. giant Vodafone Group PLC (UK:VOD 166.35, +2.30, +1.40%) (VOD 25.95, +0.04, +0.15%) gained 1.2%. The Observer newspaper reported that the company is finalizing a deal to sell its 44% stake in French mobile operator SFR to co-owner Vivendi SA (FR:VIV 19.72, +0.05, +0.25%) . Vivendi shares gained 0.6%.
Staying in France, shares of Hermes International (FR:RMS 147.05, -3.50, -2.32%) declined 3%. The maker of the iconic Kelly handbag said it has set up a holding company for more than 50% of the share capital as it prepares to fend off a possible takeover by LVMH Moet Hennessy Louis Vuitton SA (FR:MC 121.15, -0.55, -0.45%) .
Another big mover Monday was Hochtief AG (DE:HOT 63.46, +3.65, +6.10%) , which climbed 2.9%. The German construction company said Qatar Holding has become a major shareholder with an almost 9.1% stake.
Another bright spot was Winterthur Technologie AG (CH:WTGN 62.00, +4.00, +6.90%) , which jumped 7% after the company agreed to be acquire by 3M Co. (MMM 86.94, +0.43, +0.50%) for a total of $448 million.
In the retail sector, shares of British supermarket giant Tesco PLC (UK:TSCO 421.20, -5.70, -1.34%) fell 1.7% after it was downgraded to neutral from buy at UBS. The downgrade sent chills throughout the retail sector. Shares of Carrefour (FR:CA 32.80, -0.31, -0.94%) fell 1.4% and Metro AG (DE:MEO 57.77, -0.76, -1.30%) declined 1.3%.
