Banks hold back European shares, KBC slides

Tue Dec 11, 2012 4:49am EST

* FTSEurofirst flat
    * Banks underperform on Italy uncertainty
    * HSBC, Standard Chartered slip after agreeing US fines
    * Whitbread, Metso up on earnings news

    By David Brett
    LONDON, Dec 11 (Reuters) - European shares were flat early
on Tuesday with broad gains offset by weakness in banks 
which were led lower by Dutch lender KBC Groep 
following its sale of new shares.
    Banks were the worst performers on the index for the second
consecutive session, although losses were less than on Monday.
Investors are taking stock of the potential for political
instability in the euro zone after Italian Prime Minister Mario
Monti announced at the weekend that he would step down after the
2013 budget was agreed.
    Banks' exposure to European debt makes them vulnerable to
further potential shocks from the crisis-hit euro zone as they
rebuild capital to buffer their balance sheets.
    Belgian banking and insurance group KBC was down
6.7 percent after it said late on Monday it had raised roughly
1.25 billion euros ($1.6 billion) to shore up its balance sheet
at the same time as paying back state aid to Belgium.
 
    Heavyweights HSBC and Standard Chartered 
meanwhile fell 0.6 percent apiece after they agreed separate
fines with U.S. regulators following investigations into their
business activities.  
    Stocks continue to be resilient to political uncertainty in
Europe, and by 0906 GMT, the FTSEurofirst 300 was down
0.02 of a point at 1,134.51, having rallied more than 6 percent
over the last 15 days.
    "Technicals still look strong. The only crisis indicator I
see from a technical point of view which says 'let us look for a
safe haven' is the Bund future, which looks very high," Petra
Kerssenbrock, strategist at Commerzbank, said.
    "On the whole we are positive. We have had a good year and a
good rally (late on) so if we see slowdown on the back of
newsflow that is welcome, but the market has proven to be
robust."
    Kerssenbrock sees resistance for Germany's DAX -
currently at 7,535 - between 7,500 and 7,600, with any break
above 7,600 likely to be short-lived.
    Spain's IBEX outperformed, with traders citing a
technical bounce back from Italy-related falls on Monday.
    "Yesterday the IBEX posted a so-called doji or hammer
formation, which is a typical reversal formation often followed
in this case by some early follow-through buying," a
London-based trader said.
    "Also there is some relief that the situation
concerning Italy hasn't escalated," he added.
    Top gainers on the FTSEurofirst were boosted by earnings
news with Finnish engineering group Metso up 3.3
percent after it gave a stronger than expected outlook for 2013
sales and profit. 
    Whitbread added 3.3 percent after Britain's biggest
hotel and coffee shop operator, posted a 3.3 percent rise in
third quarter sales. 
    French utility GDF Suez meanwhile rallied 7.8
percent after Exane BNP Paribas raised its recommendation on the
firm to "outperform" on improving fundamentals.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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