By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets extended gains in
choppy trade on Monday, with car makers in the driver's seat after
a broker upgrade, while the broader sentiment tracked the U.S.
higher.
The U.K.'s FTSE 100 jumped to the highest close since September
2000.
Volume was low as several markets across mainland Europe was
closed for Whit Monday.
The Stoxx Europe 600 index rose 0.3% to 309.77, closing at the
highest level since June 2008.
Last week, the index closed with a fourth straight week of
gains, boosted by aggressive easing measures from central banks,
which offset worries about growth in the euro zone. Lackluster
growth data from the currency bloc actually supported the upbeat
sentiment last week, as it raised speculations the European Central
Bank could cut rates further.
"We're seeing a bit of a hangover from the mood we had last
week, but it's still very much the same sentiment," said Victoria
Clarke, economist at Investec Securities. "There is further
optimism about the months ahead and we're getting over worries
about a soft patch for Q2."
"There is a lot of good news priced in at the moment, and if we
see disappointing data from China or the U.S. it could trigger a
move downward," she added.
According to analysts at Morgan Stanley, however, macro data
will start to improve going forward, which should ensure a
continuation of the rally in European equities.
Later in the week, durable-goods orders and existing home sales
are on tap in the U.S., while the preliminary Chinese manufacturing
purchasing managers' index is out on Thursday.
"Possibly the German Ifo index on Friday will also be one of the
main events, because it'll give us an idea if another rate cut from
the ECB is on the table. If we see a big drop, it could open the
door for a discussion on further rate cuts at the meeting next
month," Clarke said.
Among notable movers in Monday's trades, shares of Ryanair
Holdings PLC jumped 6.9%, after the budget airline reported a 13%
rise in full-year profit and a 5% increase in passengers.
Peer firm EasyJet PLC rose 4%.
On a more downbeat note, shares of FirstGroup PLC sank 30.5%,
after the transport operator reported an 87% fall in full-year
pretax profit and it said it won't pay a final dividend for fiscal
2013.
Clues from Asia and the U.S.
For the broader European stock markets, investors took a hint
from the U.S., where stocks traded higher on Wall Street, after
another record-setting session for U.S. stocks on Friday. Both the
Dow Industrials (DJI) and the S&P 500 index (SPX) nudged
all-time closing highs at the end of last week, after encouraging
economic data.
On the data front in the U.S., the Chicago Fed's national
activity index worsened in April, falling to negative 0.53 from
negative 0.23 in March.
Last week's gains in the U.S. helped spur a rally in Asia on
Monday, where Japanese stocks rose after the government upgraded
its outlook for the domestic economy.
Miners drop, car makers rally
Back in Europe, mining firms showed weakness as metals prices
traded in negative territory for most of the session. Silver
futures (SIN3) were in for a rough ride during European trading
hours, especially weighing on the silver miners. The world's
largest primary silver producer Fresnillo PLC gave up 3.3% in
London, while Polymetal International PLC lost 2.6%.
On a more upbeat note in London, shares of HSBC Holdings PLC
(HBC) gained 1.5%, after the bank said John Thornton, chairman of
its remuneration committee and its North America business since
2008, will step down this month.
Shares of Royal Bank of Scotland Group PLC (RBS) rose 4.5%,
after Numis lifted the bank to buy from hold, according to media
reports.
The U.K.'s FTSE 100 index moved 0.5% higher to 6,755.63, the
highest closing level since September 2000, according to
FactSet.
Elsewhere, Germany's DAX 30 index added 0.7% to an all-time
closing high of 8,455.83 as car maker moved higher, after analysts
at Morgan Stanley lifted the European auto sector to overweight
from equal weight.
"The autos sector has seen some of the biggest EPS downgrades in
the market recently and autos' 12-months earnings revisions ratio
is now approaching prior lows. Given improving newsflow from the
sector, even in terms of EU sales, we suspect this trend will
reverse soon," they said.
Volkswagen AG added 3.2% in Frankfurt, BMW AG gained 2.9% and
Daimler AG put on 2.8%. Porsche Automobil Holding SE gained 3.3%
outside the main index in Germany.
In France, shares of Peugeot SA jumped 5.9% and Renault SA
climbed 1.4%.
Shares of STMicroelectronics NV put on 2.7% in Paris, after J.P.
Morgan Cazenove reinstated coverage of the chip maker with an
overweight rating.
The CAC 40 index gained 0.5% to 4,022.85.
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