* Lisbon's PSI-20 equity index outperforms to rise 0.2 pct
* Portuguese market buoyed by signs of economic recovery
* Credit Suisse cuts Germany to "benchmark" vs "overweight"
* Backdrop of M&A activity cushions stock markets
By Sudip Kar-Gupta
LONDON, May 6 European stock markets fell across
the board on Tuesday, apart from Lisbon which swam against the
tide as new signs of a Portuguese economic recovery buoyed the
The pan-European FTSEurofirst 300 index, which had
reached a near 6-year high of 1,357.05 points earlier this
month, retreated by 0.4 percent to 1,342.42 points.
The euro zone's blue-chip Euro STOXX 50 index
also fell 0.7 percent while Germany's DAX, which hit a
record high of 9,794.05 points in late January, slipped 0.7
percent to 9,460.02 points.
Credit Suisse equity strategists on Tuesday cut their rating
on Germany to "benchmark" from "overweight", highlighting the
risk that German exporters could be hurt by a Chinese economic
Hantec Markets analyst Richard Perry added that Germany
could underperform further as authorities in Ukraine continue to
clash with pro-Russia supporters, since German companies are
among the most exposed in Europe to Russia and Ukraine.
However, Lisbon's PSI-20 equity index outperformed
to rise by 0.2 percent.
Francois Savary, chief investment officer at Swiss bank
Reyl, said his firm had decided to increase its exposure to
Portuguese equities three months ago due to signs that the
nation's economy was slowly recovering after its bailout from
the euro zone debt crisis.
Following in the footsteps of Ireland, Portugal said it
would end its international bailout this month without a back-up
loan. Barely two years ago, Lisbon had been seen as at risk of
defaulting on its debts.
On Tuesday, yields on the euro zone's lower-rated bonds hit
record lows as investors welcomed Portugal's plans for a "clean"
exit from its bailout and continued to expect some future easing
of ECB monetary policy.
"The economic statistics are confirming that there is a
recovery in place. It's a virtuous cycle that is in place," said
SUPPORT FROM MERGER ACTIVITY
European equities were cushioned from bigger losses by new
signs of merger and acquisition (M&A) activity.
Paris-listed telecoms gear maker Alcatel Lucent
rose 2.5 percent in brisk volume on renewed speculation that
Finnish rival Nokia could buy Alcatel. Spokeswomen
for Nokia and Alcatel declined to comment on the rumour.
German auto parts and tyre maker Continental also
outperformed with a 0.6 percent rise as its finance chief
Wolfgang Schaefer said the company aims to grow by buying firms
and would be able to shoulder another multi-billion euro
acquisition in the next 18 months.
"We believe heightened M&A activity could act as a catalyst
for a more general focus on value-style investing, while adding
to the attractions of European equities in general," Barclays
equity strategists wrote in a note.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by Ruth Pitchford)