By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets moved mostly
higher on Monday after softer-than-expected euro-zone manufacturing
data and weak German inflation numbers added to expectations the
European Central Bank will launch easing measures at its meeting on
Thursday.
The Stoxx Europe 600 index gained 0.2% to end at 345.08, after
closing with a seventh straight weekly rise on Friday.
Topping the list of gainers in Monday's trade, shares of Orion
Oyj rallied 15% after the Finnish drug maker lifted its full-year
earnings guidance, as it struck a deal with German peer Bayer AG to
develop a prostate cancer drug.
On a sector basis, mining firms helped lift the pan-European
benchmark after China's official manufacturing Purchasing Managers
Index rose to 50.8 in May, compared with 50.4 in April. Analysts
polled by Dow Jones expected the PMI to come in at 50.6. A reading
above 50 signals expansion.
Miners are sensitive to growth indications from China, as the
country is a major user of natural resources. Shares of Rio Tinto
PLC (RIO) climbed 2.1% in London, BHP Billiton PLC (BHP) advanced
1%, and Anglo American PLC picked up 2.3%.
The moves helped lift the U.K's FTSE 100 index , which put on
0.3% to 6,864.10.
PMIs maintain pressure on ECB to act
PMIs were also in focus in Europe, where the final readings for
May were released. For the euro zone, the data showed the region's
manufacturing sector expanded at a slower pace than initially
thought, with the PMI coming in at 52.2, down from the flash
estimate of 52.5.
Howard Archer, chief U.K. and European economist at IHS Global
Insight, said in a note the data highlight "that the euro zone is
still finding it a struggle to really develop growth momentum."
The numbers therefore, Archer noted, reinforce the view that the
ECB will deliver a package of easing measures at its meeting on
Thursday, including liquidity measures and a cut to interest
rates.
"If the ECB fails to deliver, having built up expectations, it
risks upsetting the markets and also denting its credibility," he
said.
ECB President Mario Draghi said in May that the Governing
Council would be "comfortable" with easing monetary policy in June,
triggering a selloff in the euro (EURUSD). The shared currency
traded fractionally below $1.40 ahead of his comments, but has
since fallen considerably and traded at $1.3602 on Monday.
"The ECB would undoubtedly like to see it head down further. It
needs to impress the markets for this to happen," Archer said.
More broadly, the indexes in Europe moved a notch lower in the
afternoon after U.S. markets were hit by manufacturing data that
initially fell short of expectations. The S&P 500 (SPX) was
already in the red ahead of the Institute for Supply Management
report, but weakened to as low as 1,915.89 after the release.
The index, however, inched back in black on reports the ISM had
miscalculated the data. Read: Stock market live blog: S&P 500
retreats from record as ISM report misses forecasts
German data
Germany's DAX 30 index closed 0.1% higher at 9,950.12, shaking
off the final manufacturing PMI reading that dropped to a
seven-month low. May inflation for Europe's largest economy also
came in weaker than expected, with the EU-harmonized year-on-year
reading at 0.6%, down from 1.1% in Apri. Analysts largely expected
inflation around 0.9% and the weak level for May further
highlighted the need for ECB measures to tame the risk of deflation
in the euro zone.
The euro-zone wide inflation data come out on Tuesday.
Spain's IBEX 30 index rose 0.3% to 10,827.40, buoyed by PMI data
indicating the sharpest increase in purchasing activity since April
2010, and after the Spanish Prime Minister Mariano Rajoy said
Saturday he is planning to introduce a 6.3 billion-euro ($8.59
billion) economic stimulus package.
In France, the PMI figures confirmed that business conditions in
the manufacturing sector deteriorated for the first time in three
months during May. The manufacturing PMI fell to 49.6, down from
51.2 in April, but better than the preliminary reading of 49.3.
The CAC 40 index fell 0.1% to 4,515.89, with BNP Paribas SA
among decliners. The bank dropped 0.6% after Goldman Sachs removed
the French lender from the pan-Europe conviction buy list and cut
the rating to neutral from buy. The Goldman analysts said "a
potentially meaningful financial penalty in the U.S. curtails the
outlook for capital return."
BNP shares fell 2.4% on Friday on news the U.S. Justice
Department seeks $10 billion from the French bank to resolve a
criminal probe.
Outside the major indexes in Europe, STMicroelectronics NV gave
up 2.4% after Citigroup cut the chip maker to sell from neutral.
The analysts said the current valuation assumes "an over-optimistic
increase in returns".
Shares of Det Norske Oljeselskap ASA climbed 9.1% after it
agreed to buy the Norwegian operations of U.S.-listed Marathon Oil
Corp.(MRO) for $2.1 billion in cash.
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