By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets struggled to make
headway Monday as investors awaited the start of U.S. earnings
season later in the week and as Wall Street kicked off trading on a
weaker note.
French banks were leading the gainers in Europe after broker
action, while downbeat deal news prompted heavy selling in shares
of TNT Express NV and PostNL NV.
The Stoxx Europe 600 index fell 0.2% to 286.37. The index posted
a 0.3% loss last week.
In Paris, shares of Societe Generale SA rose 3.5% and Credit
Agricole SA rose by 2.4% and 3.9%, respectively. Credit Suisse
upgraded the French banks to overweight, citing positive effects of
2012 asset disposals and inexpensive valuations relative to
peers.
Credit Suisse analysts also said they were positive on Credit
Agricole's refocus on its core franchise.
The banking-sector gains helped drive a 0.3% gain for the French
CAC 40 index , which traded at 3,717.58.
Deal news
Also higher in Paris, shares of Compagnie de Saint-Gobain SA
rose 1.6%. The company said Ardagh Glass Ltd. has made a "binding
and irrevocable" offer valued at $1.69 billion for the French
conglomerate's North American unit, which makes glass bottles and
jars.
In other deal news, shares of Swatch Group AG rose 3.4% after
the Swiss watch company said it paid $750 million for the jewelry
and watch brand of Harry Winston Diamond Corp. (HWD) of Toronto.
Swatch also assumed as much as $250 million of pro forma net
debt.
But shares of Dutch-based TNT Express plunged 42% and PostNL
plummeted 34%, undercut hours after United Parcel Service (UPS)
said it expects the European Commission will refuse to approve the
U.S. logistics group's proposed $6.8 billion buyout of TNT Express
over competition concerns.
UPS said that if the deal's blocked, it will be terminated.
PostNL has been in the process of trying to dispose of its nearly
30% stake in TNT.
Evans remarks; Bernanke next
Europe stocks got a boost earlier on Monday after comments from
Charles Evans, president of the Federal Reserve Bank of Chicago.
Media reports about remarks he made in Hong Kong said Evans
predicted the U.S. economy will grow by 2.5% in 2013, improving to
a 3.5% growth rate for gross domestic product in 2014.
Coinciding with the close of U.S. trading on Monday, Fed chief
Ben Bernanke will give a speech in Ann Arbor, Mich., with a
question-and-answer session to follow.
Stephen Pope, managing partner at Spotlight Ideas, said equities
in Europe have made some gains based on hopes that all central
banks, but crucially the Fed, will "remain tilted toward
intervention," as growth in developed economies remains tepid.
"If the sense that they will stay engaged is perceived then the
expectation that investors will achieve their desired rates of
return on capital deployed then we will see steady gains as
carefully selected 'Risk on' assets dominate the early 2013 asset
allocation decisions," Pope said in emailed comments.
"Be wary of fast-moving stocks that over the medium term are
unable to be price makers," he said. "Bottom line is going to be
vastly more important in 2013 than top line. Cost control [and]
liquidity will still dominate."
But a weaker opening for U.S. markets capped gains across
Europe.
Among other regional indexes, the DAX 30 index rose 0.4% to
7,742.83 in Frankfurt, led by shares of German chemicals group BASF
SE , up 1%. Deutsche Bank said BASF remains its top pick in this
space, rated a buy. Linde AG also ranks among its top picks, with a
buy rating.
Shares of Volkswagen AG rose nearly 1%. Societe Generale said it
believes the automaker will continue to outperform in all major
markets, but it did reduce earnings forecasts on the group.
Volkwagen's 2013 earnings before interest and taxes forecast was
cut to EUR14.4 billion from EUR15.8 billion.
In London, the FTSE 100 index was flat at 6,126.61. Broker
action also commanded much of the action for the index.
Shares of Eurasian Natural Resources Corp. PLC , traded 2.7%
higher. Credit Suisse analysts upgraded its rating to outperform
from neutral, saying they believe that downside risks are now
limited and that there are potential re-rating catalysts this
year.
Heavyweight GlaxoSmithKline PLC (GSK) fell 0.8%. The
pharmaceutical said Monday that it submitted a diabetes drug
candidate for scrutiny before the U.S. Food and Drug
Administration.
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