By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- After a choppy trading day, European
stock markets ended mildly higher on Thursday although gains were
dented by escalating tensions in Ukraine with Russia beginning
military drills near the Ukrainian border.
The Stoxx Europe 600 index dropped 0.3% to end at 336.13,
pulling back from trading as high as 337.84 earlier in the day.
The benchmark briefly turned lower in afternoon action after
news reports said Russia launched military exercises near the
Ukraine border in response to the latest clashes, in which at least
five pro-Russian activists were killed, in eastern Ukraine.
According to The Wall Street Journal, Russia's defense minister
also said the exercises will include air operations near the
Ukrainian border.
"Traders are taking this threat very seriously and we have seen
a hasty change in sentiment on our end," said Naeem Aslam, chief
market analyst at AvaTrade, in a note. "If Russia does follow its
plan, then we will anticipate a further sharp selloff across the
board for the equity markets."
Given the "heightened risk" of a Russian attack, Ukraine put its
anti-separatist operations in the eastern town of Slovyansk on
pause, a senior security official said, according to The Wall
Street Journal.
Russia's blue-chip MICEX index slid 2.2% to 1,300.54.
Among other European benchmarks, Germany's DAX 30 index was
earlier in the day also hit hard by the turmoil due to the
country's big exposure to Russia. The index fell to as low as
9,410.33, but ended the day 0.1% higher at 9,548.68.
The U.K.'s FTSE 100 index gained 0.4% to 6,703, while France's
CAC 40 index picked up 0.6% to 4,479.54.
Alstom rallies 11%
Shares of Alstom SA rallied 11% in Paris after reports that
General Electric Co. (GE)is looking to buy the French industrial
company. Ishaq Siddiqi, market strategist at ETX Capital, said in a
note such a takeover would be the biggest in GE's history and that
it would make "complete strategic sense."
"GE is basically in every one of Alstom's businesses plus more,"
he said. "If GE manages to charm Alstom into its arms, the deal
would be worth 5% of the U.S. giant's market cap." GE shares were
up 0.6% in New York at the time of the European close.
A representative from Alstom said in a statement that the
company is unaware of any potential offer and that the group will
use its annual report on May 7 as an "opportunity to give an update
on the prospects of its activities." A representative from GE
declined to comment on the report.
Markets find support in Draghi comments
Earlier in the day, European markets broadly found support in
the latest comments from ECB President Mario Draghi. Speaking at a
conference in Amsterdam he commented on the strong euro exchange
rate and said it is an "increasingly important factor" in monetary
policy, which could trigger additional easing action.
"A rise in the exchange rate, all else being equal, implies a
tightening of monetary conditions, a downward impact on inflation
and potentially a threat to the ongoing recovery. If so, this would
call for policy action to maintain the current accommodative
stance," Draghi said in his speech.
Discussing the low inflation level in the currency union, Draghi
said a worsening of the medium-term inflation outlook may call for
a broad-based asset-purchase program.
The European benchmarks also held on to gains in the morning
after the German Ifo business-climate index rose to 111.2 points in
April, up from 110.7 in March and beating expectations of a small
decline.
In corporate news in Europe, shares of AstraZeneca PLC (AZN)
climbed 3.3% in London after the drug maker confirmed its 2014
financial guidance. The company, however, posted a fall in
first-quarter profit as sales of its best-selling drugs continued
to be squeezed by generic competition.
In Paris, Technip SA jumped 8.8% after the oil-services firm
confirmed its financial targets for 2014 and 2015.
Shares of Carrefour SA gave up 1.1% after Exane BNP Paribas cut
the supermarket chain to underperform from neutral.
Outside the major indexes, shares of Novartis AG dropped 1.9%
after the pharma firm's first-quarter profit narrowly missed
analyst expectations.
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