ALU

By Barbara Kollmeyer and Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Europe's benchmark index inched into positive territory on Wednesday, after a report said the European Central Bank may move to negative deposit rates if needed to stimulate the economy.

Markets had already started to trim declines on the heels of U.S. data, but investors appeared reluctant to make major moves ahead of minutes of the October Federal Open Market Committee meeting due later.

The Stoxx Europe 600 index rose 0.1% to close at 322.91, erasing a loss of 0.4%. The index broke a three-day winning run on Tuesday with a drop of 0.7%, the biggest percentage decline since Oct. 8, after closing Monday at the highest level in more than five years.

Shares of Metro AG rose 2.4% after the German retailer was raised to overweight from equal-weight at Barclays. The analysts cited as positives the company's announcement that it's mulling an initial public offering for a minority stake in its Russian Cash & Carry business, and implications that it may take a more generally proactive approach to managing its portfolio. In addition, Barclays is optimistic about improving sales trends, and analysts said an earnings report due in December could lead to consensus upgrades.

On the downside, Wirecard AG , a payment-processing firm, fell 5.2% after Barclays cut the shares to equal-weight from overweight, citing a 50% year-to-date share appreciation that has pushed the stock through the analysts' price target. The analysts said it's increasingly difficult to justify the company's valuation multiple versus organic growth.

Also lower, Alcatel-Lucent SA (ALU) fell 3.5% after announcing a capital increase. On Tuesday, The Wall Street Journal, citing unnamed sources, said Nokia Corp. (NOK) would not go ahead with a deal between the Nokia Solutions and Network business and Alcatel-Lucent. Neither Nokia nor Alcatel-Lucent would comment to the WSJ.

More broadly, Europe stocks retraced earlier losses after Bloomberg News reported the ECB is considering a smaller-than-usual cut to its deposit rates that would bring the rate into negative territory for the first time. Policy makers would reduce the deposit rate to minus 0.1% from zero if warranted by the economic outlook, the report said. The euro (EURUSD) dropped after the report to trade below $1.35.

Earlier in November, the ECB cut its key lending rate by a quarter of a percentage point to a record low of 0.25%, but didn't make any changes to the deposit rate. At the news conference, ECB President Mario Draghi said the bank is "technically ready" to reduce the deposit rate below zero if needed.

Markets on Wednesday also reduced losses after a round of data showed a slightly brighter outlook for the U.S. recovery, with retail sales up and consumer prices easing. The Fed minutes from its October meeting are still to come.

Investors are keen to see if the Fed will taper in December, though Fed Reserve Chairman Ben Bernanke indicated Tuesday evening that accommodative policy was not going to change in the near term. He said the Fed would likely hold rates near zero even after the economy reaches the 6.5% unemployment rate that is the threshold for considering a rate hike.

James Bullard, president of the St. Louis Fed, on Wednesday told the Bloomberg Business Summit that a taper could come at the December meeting, particularly if the November jobs report is strong.

U.S. stocks traded higher on Wall Street.

Among the major indexes, the German DAX 30 index added 0.1% to 9,202.07, while the French CAC 40 index closed down 0.1% to 4,268.37, weighted by Alcatel, and losses for banks such as Société Générale SA , off 1.2%. The FTSE 100 index fell 0.3% to 6,681.08.

Marc Faber, author of the Gloom Boom and Doom newsletter, told CNBC in an interview on Tuesday that Europe stocks may be poised to outperform both the U.S. and emerging markets, but cautioned on indiscriminate buying across Europe given the fact markets have run up so strongly. The Stoxx 600 has climbed more than 15% so far this year.

Heino Ruland of Ruland Research said in a note on Wednesday that investors are underestimating what German companies can deliver on earnings in the year to come.

"Considering the rebound of exports, lifted capital spending in new plant & equipment, ongoing improvement of domestic demand as a result of rising employment, we are confident that next year's earnings growth (10.1 %) is simply too low, which is why we stick to our long recommendation of German equities," he said in a note.

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