By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets shook off early
losses and edged higher Thursday as the wait began for policy
decisions from the European Central Bank and the Bank of England.
U.K. retailers fell on downbeat updates from major names, while
technology stocks were active after a broker note, with ASML
Holding NV among the gainers.
The Stoxx Europe 600 index rose 0.3% to 330.60, hovering around
the highest levels in five-and-a-half years.
Shares of Wm. Morrison Supermarkets dropped 5.5% 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.
Tesco PLC fell more than 3% after the company said comparable
U.K. sales fell by 2.4% in the six weeks to January.
TGS-NOPEC Geophysical Company ASA shares jumped 13% 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 9% 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 major focus for markets will be interest-rate decisions,
with the Bank of England's Monetary Policy Committee due to hand a
decision down at 7 a.m. Eastern Time. No change is expected, though
some may be looking for a change in the bank's forward guidance,
given a recent sharper-than-expected fall in unemployment. The
pound has surged on speculation that a drop in the jobless rate
could trigger a sooner-than-expected rate hike.
The European Central Bank will meet 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.
Banks were the biggest losing sector on Thursday, with shares of
HSBC Holdings PLC (HSBC) off 1%, but the FTSE 100 index shook off
those losses and as well as those for retailers. The index rose
0.3% to 6,744.35, 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 to buy, with Deutsche Bank
analysts saying a deteriorating mix will put incremental pressure
on gross margins. Shares of ARM Holdings fell 4%, and
Alcatel-Lucent dropped 4.4%.
Deutsche Bank reiterated its buy rating on ASML Holding NV
(ASMLD) , saying expectations have already moderated for the group.
Shares of ASML rose 2.8%.
Among other indexes, the German DAX 30 rose 0.5% to 9,545.27,
with Daimler AG gaining 2%. Shares of Fresenius Medical Care AG
& Co. gained more than 1% 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 1.5%.
Analysts said the European medical technology and services sector
should face fewer headwinds than in 2013.
The French CAC 40 index was up 0.4% to 4,277.38.
Peripheral markets shook off early losses and marched higher
again. The Spain IBEX 35 index rose 0.7% to 10,324.20. Those
markets have been gaining as borrowing costs have been falling,
amid hopes that economic recovery is underway for many of the
euro-zone's nations hardest hit by the downturn.
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