CORRECT: WSJ: European Stocks Begin Week On A Positive Note

Monday, Jan 23, 2012

("WSJ: European Stocks Begin Week On A Positive Note," at 2:03 p.m. EST, misstated the price change for ThyssenKrupp in the tenth paragraph. The correct version follows:)

 
   By Andrea Tryphonides 
   Of THE WALL STREET JOURNAL 
 

European stocks got off to a positive start to the week, closing up Monday, while the euro edged above the $1.30 mark vs. the dollar, shrugging off an apparent impasse between the Greek government and its private-sector creditors who are trying to come to a deal on debt write-downs.

Investors appeared to be subscribing to the adage "no news is good news" after talks to restructure Greece's debt didn't conclude over the weekend as previously expected. However, there were reassurances by European Commissioner Olli Rehn that negotiations were on track and would reach a positive conclusion. This provided a welcome boost to European bank stocks in particular. The Stoxx Europe 600 banks index ended up 2.1%. Meanwhile, euro-zone finance ministers gathered in Brussels to discuss the euro-zone debt crisis and the strengthening of firewalls to stem contagion risks.

Amid the continuing negotiations in Europe, investors have become tentatively more positive on equities. Although just three weeks into January, there is some reason for optimism, said Goldman Sachs in a note. European equity indexes have risen 9%-17% since the end of the third quarter 2011 and 3%-9% year to date.

"We also believe that institutional investors are positive net allocators to equities year to date. Although retail investors continue to reduce their equity holdings, we believe these flows are likely to reverse if equity markets maintain their current trajectory," said the brokerage.

The Stoxx Europe 600 index closed up 0.5%, at 257.01 Monday, its highest close since August 2011. The U.K.'s FTSE 100 closed 0.9% higher, at 5782.56, Germany's DAX increased 0.5%, to 6436.62, and France's CAC-40 closed 0.5% higher, at 3338.42. At the close of European equity markets, the Dow Jones Industrial Average and Standard & Poor's 500-stock index were both 0.1% lower.

Despite the higher close in Europe, some traders weren't sharing in the day's optimism. Louise Cooper, markets analyst at BGC Partners, has several reservations about the debt negotiations between Greece and its private creditors.

"In any resulting enthusiasm for a deal and excitement over the temporary alleviation of difficulties, do not forget the bigger picture. This deal is no guarantee that Greece will not default in the future. It just puts it off for the time being," she said.

Nevertheless, shares of Italian and French banks rallied on hopes Greece would come to a deal soon with its private creditors. UniCredit soared 10% and Societe Generale gained 8.5%.

In Spain, the country's government announced plans to launch a comprehensive financial reform plan to look at whether more Spanish banks need to be merged. Banco Santander ended up 1.2% and Banco Bilbao Vizcaya Argentaria finished up 1.3%.

Elsewhere, ThyssenKrupp gained 0.4% after confirming it is in talks with Finnish rival Outokumpu about a potential business combination of Outokumpu and ThyssenKrupp's stainless-steel operations Inoxum. Outokumpu gained 18%.

Adding to the positive sentiment, oil companies rose. BP gained 2%, Royal Dutch Shell climbed 3% and Petrofac advanced 1%.

In currency markets, the euro surged above the $1.30-level against the dollar as traders closed negative bets on the euro ahead of the meeting of the 17 euro-zone finance ministers Monday. At 1650 GMT, the euro was at $1.3034 from 1.2931 late Friday.

In commodity markets, crude-oil futures were modestly higher after the European Union imposed an embargo on oil imports from Iran. The move was largely expected and traders said it was priced in.

Light, sweet crude for March delivery was up 75 cents, or 0.8%, at $99.08 on the New York Mercantile Exchange by the close of European equity markets. Most actively traded gold for February delivery on the Comex division of the New York Mercantile Exchange was up $15.80 per troy ounce, or 1%, at $1,679.80.

--Sara Sjolin contributed to this article.

(END) Dow Jones Newswires

January 23, 2012 14:16 ET (19:16 GMT)