European shares advance towards highs; Maersk up

Wed May 21, 2014 12:32pm EDT

* FTSEurofirst 300 closes 0.6 percent higher

* A.P. Moller-Maersk rises after results

* BNP Paribas falls on U.S. investigation concerns

By Atul Prakash

LONDON, May 21 (Reuters) - European shares finished higher on Wednesday, with Danish shipping and oil group A.P. Moller-Maersk gaining after its profit beat forecasts and German utilities rising on the back of broker upgrades.

The pan-European FTSEurofirst 300 ended 0.6 percent higher at 1,364.76 points, just below last week's six-year peak. The index was helped by companies like Maersk and Germany's top utilities E.ON and RWE.

E.ON and RWE rose 3.2 percent and 3.6 percent respectively after RBC Capital Markets upgraded E.ON to "outperform" from "underperform" and raised RWE to "sector perform" from "underperform".

Maersk rose 3.9 percent as profit at its container shipping business, a bellwether for global trade, more than doubled in the first quarter. That exceeded net profit forecasts and prompted it to raise its outlook for the full year.

"Our quant model has a 12-month return forecast of 10 percent (for Maersk). Today's results will likely increase estimates and return forecast. We remain positive on Maersk in 2014," said Peter Garnry, head of equity strategy at Saxo Bank.

Analysts remained bullish on stocks, although they expect some choppy trading in the near term.

"We are positive on European equities in the medium-term. There are a few potential catalysts on the horizon," Robert Parkes, an equity strategist at HSBC, said.

"We expect the European Central Bank to cut rates next month and there is the potential for some kind of quantitative easing. We also expect GDP growth in Europe this year to be stronger than last year and we see a further improvement in 2015."

But index gains were held back by declines for some individual stocks.

WM Morrison fell 2.1 percent to feature among the top decliners on the FTSEurofirst 300 index, after Deutsche Bank analysts cut their rating on the company to "sell" from "hold".

And BNP Paribas dropped 1.3 percent after a report that U.S. authorities were seeking more than $5 billion from the bank to settle investigations into its dealings with sanctioned countries.

Reuters reported last week, citing people familiar with the matter, that France's biggest listed bank was negotiating with U.S. authorities to pay more than $3 billion to resolve investigations into whether it violated U.S. sanctions on Iran, Sudan and other countries.

Daniel McCormack, a strategist with Macquarie, said for now investors should focus on companies that can deliver earnings and give credible guidance.

"More longer term, you do want to be focused on cyclicals such as industrials and financials, because we are in an early stage of an upswing," he said.

According to Thomson Reuters StarMine, 83 percent companies on the STOXX Europe 600 index have reported results so far, of which 51 percent have missed analysts' earnings expectations. Fifty-five percent have missed revenue forecasts.

Defensive sectors such as utilities, up 2.8 percent so far this month, continued their recent run of outperformance against the broader STOXX 600 index, which has managed only a flat showing in May.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Alistair Smout; Editing by Larry King)

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