* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 flat
* Alstom up on German support for Siemens tie-up
* Miners gain as JPMorgan upgrades sector to “overweight”
By Tricia Wright
LONDON, May 12 (Reuters) - European stocks inched higher on Monday, with France’s Alstom rallying after Germany said it would support a takeover by Siemens, but tensions in Ukraine are likely to limit the market’s strength.
The FTSEurofirst 300 was up 0.1 percent at 1,357.11 points by 0746 GMT after slipping 0.3 percent on Friday, leaving it just shy of a near-six-year high reached last week at 1,359.43. The euro zone’s blue-chip Euro STOXX 50 index was flat, at 3,183.76 points.
Alstom - which is reviewing a bid by U.S. giant General Electric for its energy businesses - climbed 2.8 percent after Chancellor Angela Merkel said on Saturday the German government would support a tie-up between Siemens and Alstom if the companies decide that it would make sense.
Equity markets have been buoyed in recent weeks by a burst of dealmaking and bids, some good news on earnings and the possibility of more stimulus steps from the European Central Bank in June. But the market may have hit a ceiling for now, amid tensions in Ukraine after Sunday’s referendum.
About 40 European blue-chips derive more than 5 percent of their revenues from the Russian market, including Austria’s Raiffeisen Bank and Finnish tyre maker Nokian Renkaat . They generate 26 percent and 21 percent respectively of their revenues in Russia, according MSCI data.
“We think the market is struggling to find direction now ... ongoing concerns over the Ukraine still simmering in the background and fears that they may descend into civil war should offset upbeat earnings forecasts that we are continuing to see,” Sanlam Securities head of trading Mark Ward said.
Miners managed gains, however, climbing with metal prices as JPMorgan lifted its rating on the sector to “overweight”.
Rio Tinto and BHP Billiton, which the investment bank saw as the most attractive stocks in the sector, outperformed their peers, up 2.6 percent and 2 percent respectively.
The Euro STOXX 50 index, which has gained about 3 percent since mid-April, has been stuck in a range since late March, halted by a long-term resistance level representing the 50 percent retracement of the index’s 2007-2009 slump.
“The index is still moving sideways for now, trying to break above 3,200 points. On the longer term, though, the bullish trend is still in place,” said Jose Antonio Gonzalez Ibanez, the head of equity technical analysis at EuroStockScreener, in Zaragoza, Spain.
Lofty valuations are preventing investors from putting more money to work in equities. The rebound in corporate dealmaking could go some way to offset this situation, but some analysts are taking a bearish short-term view on markets.
The STOXX Europe 600 trades on a 12-month forward price/earning ratio of about 14 times, against its 10-year average of 11.9 times, Thomson Reuters Datastream shows.
“I think on a one- to two-month view, I’d be reasonably cautious now. The M&A might continue to bail us out a bit, but I think on the other fundamentals it’s looking a little bit toppy,” Peel Hunt equity strategist Ian Williams said.
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 Blaise Robinson; Editing by Larry King)