European shares creep higher but mixed signals on US budget talks
EUROPEAN stocks traded around multi-month highs on Friday in what looked to set to be a turbulent session against a backdrop of mixed signals about U.S. budget talks.
The FTSEurofirst 300 was up 0.1pc at 1,123.00 in morning trade, having jumped 1.1pc on Thursday to its highest close since July 2011 on expectations U.S. politicians would reach a deal to stop the world's biggest economy falling off a 'fiscal cliff' of tax rises and spending cuts.
But House of Representatives Speaker John Boehner dampened investors' optimism after the European market close, lowering hopes of a budget deal soon and sending U.S. shares temporarily lower.
"We're going to be playing a little bit of tennis as far as comments are going to be concerned from the U.S. politicians over the coming weeks, unfortunately, over how close we are to getting anything done with the fiscal cliff issue," Alastair McCaig, analyst at IG, said.
Still, some investors are taking a positive stance.
"I would say that both sides have no interest in going over the cliff," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said.
"I think there will be some kind of agreement over the next week, or week and a half, maybe a little bit longer. Markets will anticipate that, so the underlying tone of the market will clearly be strong."
Technical factors, however, were likely to keep a check on gains.
The Euro STOXX 50, currently up 0.2pc at 2,585.47, faces resistance at around 2,600 points, the upper end of a 150-point range seen since early September, as concern about the U.S. fiscal cliff and debt-laden euro zone countries curbed a boost from central bank stimulus measures.
Broker recommendation changes were behind a number of share price moves on Friday.
HeidelbergCement was the top FTSEurofirst 300 riser, up 2.8pc, as Morgan Stanley upgraded its rating for the firm to "overweight", making the stock its top Building & Construction sector pick for the near term.
Overall Morgan Stanley cut its stance for the sector to "in-line" on a strong year-to-date performance and a less positive global outlook, while downgrading its rating for HeidelbergCement's Italian peer Buzzi Unicem to "underweight", citing a higher valuation and lower cash generation for the near-term owing to operating losses in Italy. Buzzi Unicem shares shed 1.1pc.
French luxury group LVMH also saw good gains, ahead 2.7pc after Goldman Sachs upgraded it to 'buy' from 'neutral', forecasting an improvement in demand from China.
Meanwhile, British testing, inspection and certification firm Intertek Group advanced 1.4pc, with Berenberg lifting its stance on the stock to "buy".