Friday, Apr 20, 2012

--Stocks edge up in choppy trade

--Banks rise, led by Societe Generale, BNP Paribas after BofA ML says valuations attractive

--Upbeat German Ifo helps underpin tone

--Nokia, BP shares under pressure 


   By Michele Maatouk & Ishaq Siddiqi

Of DOW JONES NEWSWIRES

LONDON -(Dow Jones)- European stock markets edged cautiously higher in choppy trade Friday, supported by a strong showing in banking stocks and an upbeat Ifo reading, although gains were limited ahead of key decisions on an expansion to the International Monetary Fund's resources this weekend.

At 1105 GMT, the benchmark Stoxx Europe 600 index was up 0.3% at 257.39. London's FTSE 100 index was up 0.2% at 5756.17, Frankfurt's DAX was 0.8% higher at 6722.81, and Paris's CAC-40 index was up 0.5% at 3190.63.

The IMF is gearing up to help deal with the growing threat of a spread euro zone debt crisis, with pledges of $320 billion arriving from countries including Japan, Switzerland and Poland. And, Hungary's prime minister late Thursday said the country wants to start formal talks with international lenders on a financial package urgently.

However, neither the U.S. nor Canada have committed to further contributions to the IMF's resources, and more significant contributions may be slow to arrive unless Europe is seen to be doing more to solve its own problems, said Rebecca O'Keeffe, head of investment at Interactive Investor.

Deutsche Bank said an additional contribution from non-European Group of Twenty countries of between EUR208 billion and EUR392 billion would allow the IMF crisis resources in aggregate to finance bail-outs for Italy and Spain, were they to be required.

Against this backdrop, the move higher was fairly understated and trade was bumpy. Still, investors were cheered by the Munich-based Ifo Institute's German business confidence indicator, which continued to edge higher in April, up to 109.9 from 109.8 in March. The current assessment index surprised on the upside, rising to 117.5 from 117.4 whilst the expectations index was stable at 102.7.

Newedge strategist Annalisa Piazza said the Ifo survey is relatively encouraging. "The global slowdown is certainly affecting the German economy. However, the overall index signals further modest improvement in activity in the second quarter of 2012," she added.

At the same time, strength in the banking sector lent support. Societe Generale gained 5.3% and BNP Paribas rose 4.4%, leading the charge following a bullish note by Bank of America Merrill Lynch. It upgraded BNP Paribas to neutral from underperform saying the shares look attractive at current prices, given profit expectations. It also raised its stance on Societe Generale, to buy from neutral. It said the shares were also attractive, after losing around EUR8 since mid March.

In corporate news, shares in food and beverage giant Nestle SA were down 0.4%, after the company said 2012 would be a "challenging year." Nestle maintained its full-year outlook as it increased sales in all of its main markets, supported by innovation in key categories and faster expansion in emerging markets.

Meanwhile, Nokia shares were in the doldrums again, off 4.2% following some downbeat broker notes. Bernstein cut its target price for the stock, keeping at underperform, saying the company is in a much worse situation than the brokerage originally thought. It said that the stock is likely to continue to underperform, as expectations for the second half are revised down, especially for the third quarter. UBS also downgraded its target price for Nokia following Thursday's first-quarter results.

In London, oil giant BP was under pressure, down 1.2% and dragging peers such as Royal Dutch Shell down with it, after the U.S. Department of Justice late Thursday released an independent audit of claims following the Deepwater Horizon oil spill in April 2010. It found claims for an additional $64 million in payments. Shell dropped 1.2%, while BG Group slipped 0.5%.

In the currency market, the euro was supported against the U.S. dollar and the yen after the IMF's managing director, Christine Lagarde, said Spain doesn't need the fund's support. In an interview Thursday with Bloomberg Television, Lagarde said, "There is no such need at the moment, as I understand." Additionally, the German Ifo survey helped.

By 1105 GMT, the single currency was at $1.3168, from $1.3138 late Thursday in New York, and at Y107.50 against the yen, from Y107.20. The dollar was at Y81.73, from Y81.60. The pound was up against the dollar, trading at $1.6096 from $1.6050, after U.K. retail sales for March showed a 1.8% rise from February, compared with expectations for a 0.8% increase. Still, market participants said panic fuel buying following a threatened strike by fuel tanker drivers, played a key role in boosting fuel sales.

In commodity markets, spot gold was at $1,642.90 per troy ounce, up 40 cents from its New York settlement on Thursday. June Nymex crude oil futures were up 64 cents at $103.36 per barrel and June Brent oil futures were up 77 cents at $118.76. In the bond market, the June bund contract was up 14 ticks at 140.47.

-By Michele Maatouk, Dow Jones Newswires; +44-20-7842-9447; michele.maatouk@dowjones.com

(END) Dow Jones Newswires

April 20, 2012 06:53 ET (10:53 GMT)