* FTSEurofirst 300 up 0.2 percent
* Novartis boosted by BofA-ML upgrade
* Portugal uncertainty highlights euro zone problems
By Tricia Wright
LONDON, April 8 European shares were led higher
by the healthcare sector on Monday as investors tiptoed back
into the market with a cautious focus on the start of the U.S.
first-quarter earnings season.
The FTSEurofirst 300 closed up 0.2 percent at
1,164.79 points, in the aftermath of Friday's 1.6 percent drop
on weak U.S. jobs figures. The euro zone's blue-chip Euro STOXX
50 advanced 0.2 percent to 2,589.25 points.
Traders noted a lack of conviction on Monday - evidenced by
low volumes - with some investors apprehensive before the start
of the U.S. earnings season, which kicks off with first-quarter
results from aluminium producer Alcoa later in the day.
The FTSEurofirst 300 traded 83 percent of its 90-day daily
"I think the markets are taking stock and thinking what are
company earnings forecasts (going to be like), what is the
consensus going to be for forward P/Es (price/earnings ratios),"
Michael Hewson, analyst at CMC Markets, said.
Investors who dipped into the market opted for sectors
better suited to a low growth environment, such as healthcare
, ahead 1 percent.
Swiss drugmaker Novartis, up 1.8 percent, was
among the biggest individual points contributors to the
FTSEurofirst 300, helped by an upgrade on the stock from BofA
Merrill Lynch to "neutral", according to traders.
Some fund managers, however, highlighted that so-called
defensive sectors, which have spearheaded the rally since the
turn of the year, are now looking expensive.
The healthcare and consumer staples sectors trade on
respective 12-month forward P/E ratios of 13.9 times and 16.7
times, according to Thomson Reuters StarMine data.
"Clearly the economic environment isn't as good as it has
been... but still there are sound valuation opportunities out
there," said Kevin Lilley, who runs Old Mutual's European
Equities fund, which has 55 million pounds ($84.1 million)
assets under management.
Lilley is "overweight" financials which, according to
Thomson Reuters data, trade on a 12-month forward P/E of 9.8
Traders said that while the long-term outlook for European
equities remained positive, with equities offering better
returns than cash and bonds, near-term prospects were clouded by
uncertainty due to the euro zone's debt crisis.
Concerns over the euro zone - which resurfaced last month
after inconclusive elections in Italy - were heightened when
Portugal's constitutional court rejected some of the austerity
measures introduced as a condition of the country's bailout.
Portugal's benchmark PSI 20 equity index
underperformed gains elsewhere in Europe, with the Lisbon market
falling 1.4 percent.
Some investors were relatively unfazed by the bouts of
political turmoil which have led to jittery trade in recent
"There's always going to be something out there that goes
against the grain but what this crisis has shown... is that
there is a real political will for things to continue and for
the euro to hold it together and the euro zone to hold it
together," Old Mutual's Lilley said.