By Sara Sjolin, MarketWatch
LONDON (MarketWatch)--Banks led European stock markets higher in
choppy trade on Tuesday, with investors keeping an eye on
continuing budget wrangling between Democrats and Republicans in
the U.S., which seemed to have come to a deadlock.
The Stoxx Europe 600 index moved 0.4% higher to 277.14.
"It's pretty quiet today with volumes on the lower end, but we
have seen some risk being added given the small dip in markets over
the few days into December. Given historical market action in
December and the expectations that a last minute deal on the fiscal
cliff will materialize we see upside risk on the market just now,"
said Atif Latif, director of trading at Guardian Stockbrokers, in
emailed comments.
"Longer term risk remains and we think that the market will
weaken after this next push up, which will be an opportune time to
take profits and position defensively and with negative bias," he
said.
Shares of TUI Travel PLC added 3%. The travel company reported a
40% increase in pretax profit for the year ended Sept. 30.
Southern European banks were also on the rise, with shares of
Banca Monte dei Paschi di Siena SpA up 7.8% and UniCredit SpA
rising 2.5%.
Elsewhere, the U.S. budget negotiations weighed on sentiment, as
the White House and congressional Republicans made little progress
in reaching a deal before a raft of automatic tax hikes and
spending cuts will take effect in the new year--an event known as
the fiscal cliff.
House Republicans on Monday offered a plan that would raise $800
billion in new revenue from taxes, which is about half of what
President Barack Obama previously proposed. The White House
dismissed the plan, saying it represented nothing new.
U.S. stock futures pointed to a slightly higher open on Wall
Street.
"Perhaps the silver lining to all this is that the dialogue
continues between both parties, although it seems the existing
positions on tax rates and entitlements remain entrenched,"
analysts at Deutsche Bank said in a note.
Separately, Deutsche Bank analysts in a different note said they
see 2.5% growth in the U.S. economy in 2013, helping stage a
rebound in global growth for the full year.
"We expect global growth of 3.5% to drive [earnings per share]
growth of 6% for the Stoxx 600," they said. "We expect the Stoxx
600 to rise to 315 by end-2013, and to 340 by end-2014. Against
this backdrop we believe we should continue to buy cyclicals. The
18% outperformance of cyclicals relative to defensives since our
2012 outlook note could be just the appetizer."
For their favorite picks for 2013, they pointed to Telecom
Italia SpA , up 2%, Intesa Sanpaolo SpA , up 2.1%, and JCDecaux SA
, up 2.9%. .
Among other notable movers on European stock markets on Tuesday,
some oil firms declined, tracking a loss for oil prices. .
Shares of BP PLC (BP) gave up 0.7% in London, while shares of
Tullow Oil PLC fell 3.8%.
The FTSE 100 index , however, gained 0.2% to 5,880.34, with
shares of heavyweight miner Rio Tinto PLC (RIO) up 1.2%, after
Credit Suisse added the stock to its Europe Focus List.
In France, most stocks traded in positive territory with shares
of Credit Agricole SA up 3% and Société Générale SA rising
2.3%.
The CAC 40 index rose 0.8% to 3,593.80.
And in Germany, Deutsche Bank AG shares (DB) picked up 1.6% and
Commerzbank AG added 1.5%.
The DAX 30 index rose 0.3% to 7,457.05.
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