European shares flat, pegged back by utilities

Fri Feb 15, 2013 7:22am EST

* FTSEurofirst 300 flat, Euro STOXX 50 edges up 0.1 pct
    * Iberdrola fall hits European utility sector
    * Traders see equities falling this month
    * Traders keep longer-term positive equity outlook
    * PPR surges after results beat forecasts

    By Sudip Kar-Gupta
    LONDON, Feb 15 (Reuters) - Weak utility stocks held back
European equities on Friday and traders said share markets in
the region would be vulnerable to profit taking in the next
month after a January rally.
    The FTSEurofirst 300 index was unchanged at
1,163.65 points around midday, while the euro zone's blue-chip
Euro STOXX 50 index edged up 0.1 percent to 6,173.85
points.
    The STOXX Europe 600 utility index was the worst
performing European sector, falling 0.7 percent.
    It was hit by a 2.3 percent fall in Spanish power company
Iberdrola, which traders attributed to signs that
lender Bankia may be looking to sell its stake in the
company. 
    Edward Allen, a fund manager at Thurleigh Investment
Managers, said that while he had recently added to positions on
European shares, he preferred U.S. and Asian equities.
    "We are more enthusiastic about American and Asian earnings
and growth prospects," said Allen, whose firm manages around 270
million pounds' ($419.2 million) worth of assets.     
    
    
    ECONOMIC WEAKNESS
    French luxury goods group PPR outperformed the
flat European markets, surging 6.7 percent after announcing
better-than-forecast results.
    "Good results once again, driven by a strong performance in
luxury, notably at Bottega Veneta, which is coming far above
expectations at both sales and earnings level," said a
Paris-based trader, who declined to be named.
    The FTSEurofirst 300 has risen around 3 percent since the
start of 2013. It has gained more than 20 percent from a low
point last June, buoyed by a European Central Bank (ECB) pledge
of new measures to tackle the region's sovereign debt crisis.
    However, signs that Europe's economic woes have not been
resolved were highlighted on Thursday by data showing the euro
zone economy contracted in the final quarter of 2012.
    Richard Edwards, head of HED Capital, said the export-led
German economy remained most resilient to the weak macroeconomic
backdrop, even though it shrank in the fourth quarter.
    Edwards advocated using any stock market weakness to buy
positions on Germany's benchmark DAX equity index while
selling Spanish, Italian and French stocks, with Spain and Italy
still hit hard by the region's debt problems.
    "There's more growth going on in the United States than in
Europe. We would use any weakness to buy Germany while selling
Italy, Spain and France," he said.
    However, McLaren Securities' managing director Terry
Torrison said any fall in equity markets this month would be
relatively short-lived and limited.
    Torrison said the broader trend remained one of investors
putting money into equities rather than cash or bonds, due to
the better returns on offer from stock dividends.
    "There is some scepticism out there that February is not
going to be a great month, but I think there's more room to run.
The momentum is still intact," said Torrison.
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