By Sara Sjolin, MarketWatch
LONDON (MarketWatch)--European stock markets struggled for
direction on Tuesday, as investors kept an eye on continuing budget
wrangling between Democrats and Republicans in the U.S., which
seemed to have come to a deadlock.
The Stoxx Europe 600 index inched 0.1% higher to 276.26.
"It's pretty quiet today with volumes on the lower end, but we
have seen some risk being added given the small dip in markets over
the few days into December," said Atif Latif, director of trading
at Guardian Stockbrokers, in emailed comments.
"Given historical market action in December and the expectations
that a last minute deal on the fiscal cliff will materialize we see
upside risk on the market just now," Latif said.
"Longer-term risk remains and we think that the market will
weaken after this next push up, which will be an opportune time to
take profits and position defensively and with negative bias," he
said.
Among major movers in the Stoxx 600, shares of Elekta AB jumped
5.7%, after the medical-technology firm reported a 22% rise in
second-quarter sales.
Shares of TUI Travel PLC added 3.3%. The travel company reported
a 40% increase in pretax profit for the year ended Sept. 30.
Southern European banks were also on the rise, with shares of
Banca Monte dei Paschi di Siena SpA up 5.5% and UniCredit SpA
rising 2.5%.
Financial markets stabilized on Monday, after Greece said it
would buy back as much as 10 billion euro ($13.1 billion) in debt
owed to private creditors in an effort to bring its debt pile to a
sustainable level.
Bucking the positive trend, shares of Tullow Oil PLC tanked
6.6%, after the oil explorer said its Zaedyus-2 appraisal well
didn't find commercial hydrocarbons.
Stalemate in U.S. budget negotiations
Elsewhere, the U.S. budget negotiations weighed on sentiment, as
the White House and congressional Republicans made little progress
in reaching a deal before a raft of automatic tax hikes and
spending cuts will take effect in the new year--an event known as
the fiscal cliff.
House Republicans on Monday offered a plan that would raise $800
billion in new revenue from taxes, which is about half of what
President Barack Obama previously proposed. The White House
dismissed the plan, saying it represented nothing new.
U.S. stock opened mixed on Wall Street.
"Perhaps the silver lining to all this is that the dialogue
continues between both parties, although it seems the existing
positions on tax rates and entitlements remain entrenched,"
analysts at Deutsche Bank said in a note.
Separately, Deutsche Bank analysts in a different note said they
see 2.5% growth in the U.S. economy in 2013, helping stage a
rebound in global growth for the full year.
"We expect global growth of 3.5% to drive [earnings per share]
growth of 6% for the Stoxx 600," they said. "We expect the Stoxx
600 to rise to 315 by end-2013, and to 340 by end-2014. Against
this backdrop we believe we should continue to buy cyclicals. The
18% outperformance of cyclicals relative to defensives since our
2012 outlook note could be just the appetizer."
For their favorite picks for 2013, they pointed to Telecom
Italia SpA , up 1.3%, Intesa Sanpaolo SpA , up 1.5%, and JCDecaux
SA , up 3.5%. .
Among other notable movers on European stock markets on Tuesday,
some oil firms declined, tracking a loss for oil prices. .
Shares of BP PLC (BP) gave up 1.3% in London.
The FTSE 100 index , however, was marginally higher at 5,872.63,
with shares of heavyweight miner Rio Tinto PLC (RIO) up 0.5%, after
Credit Suisse added the stock to its Europe Focus List.
In France, most stocks traded in positive territory with shares
of Credit Agricole SA up 2.6% and Société Générale SA rising
1.6%.
The CAC 40 index rose 0.4% to 3,582.32.
And in Germany, Deutsche Bank AG shares (DB) picked up 1.6% and
Commerzbank AG added 1.2%.
Shares of Henkel AG & Co. KGaA gave up 2.1%, after Credit
Suisse cut the firm to underperform from neutral.
The DAX 30 index was flat around 7,435.82.
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