By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- Markets in Spain and Italy were leading
gains across European markets on Thursday ahead of a policy
decision from the European Central Bank and after the Bank of
England left its own policy unchanged. U.K. retailers were in focus
after more dismal Christmas reports, while technology stocks were
active after a broker note, with ASML Holding NV among the
gainers.
The Stoxx Europe 600 index rose 0.2% to 330.43, hovering around
the highest levels in five-and-a-half years.
Shares of Wm. Morrison Supermarkets topped the decliners list
with a 7% tumble after the retailer reported a disappointing
performance over the Christmas period and said full-year underlying
profit would be at the bottom of the range of current market
forecasts.
TGS-NOPEC Geophysical Company ASA jumped 12% after the
Norway-based provider of multi-client geoscience data said net
revenues for 2013 will come in higher than expected, at $882
million, due to record-high late sales in the fourth quarter.
Shares of Finnish-based Waertsilae Oyj surged 8% after the maker
of engines for tankers, cruise and navy ships said it's no longer
in talks about a potential tie-up with Rolls-Royce Holdings PLC
.
The Bank of England's Monetary Policy Committee held the size of
its bond-buying program unchanged and its key lending rate at a
record low of 0.5%.
The European Central Bank meets against a backdrop of some signs
of economic strength, but also more deflation. Again, no
expectation of a change in policy when a decision is handed down at
7:45 a.m. Eastern Time, but the subsequent press conference with
ECB President Mario Draghi will be scoured for clues about
inflation concerns or further easing down the road.
"With interest rates at 0.25%, the ECB's hands are a little tied
when it comes to further rate cuts, which means if they want to
provide further stimulus to slow down the rate of disinflation,
they will have to explore other options, such as additional forward
guidance, negative deposit rates, LTROs or quantitative easing,
although I think the last is very unlikely," said Craig Erlam,
market analyst at Alpari, in a note.
"It is likely to take them a little longer to agree on which of
these to opt for, which is why I don't expect a decision today," he
said.
Peripheral euro-zone markets repeated their outperformance, with
the Spain IBEX 35 index up 1.1% to 10,370, while the FTSE MIB Italy
index jumped 1.4% to 19,700. Shares of banks were in the driver's
seat as the hardest-hit regions by the crisis drew new interest
from investors, who were more convinced of the recoveries as
borrowing costs have dropped.
The FTSE 100 index 0.2% to 6,734.71, supported by a 1% rise for
BP PLC (BP).
Technology stocks were active after a note from Deutsche Bank.
The investment bank downgraded shares of ARM Holdings PLC (ARMHY)
to hold from buy, saying it's waiting for better entry points. It
also cut Alcatel-Lucent SA (ALU) to hold from buy, with Deutsche
Bank analysts saying a deteriorating mix will put incremental
pressure on gross margins. Shares of ARM Holdings slid 4.5%, and
Alcatel-Lucent dropped 4%.
Deutsche Bank reiterated its buy rating on ASML Holding NV
(ASMLD) , saying expectations have already moderated for the group.
Shares of ASML rose 2.5%.
Among other indexes, the German DAX 30 rose 0.3% to 9,526.73,
with Daimler AG gaining 1.6%. Shares of Fresenius Medical Care AG
& Co. gained 2% after it was lifted to neutral from underweight
at J.P. Morgan Cazenove. The investment bank raised Fresenius SE to
overweight from neutral, and shares rose 1.6%. Analysts said the
European medical technology and services sector should face fewer
headwinds than in 2013.
The French CAC 40 index was flat at 4,262.72.
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