By Aude Lagorce
LONDON (MarketWatch) -- European bourses rose Monday in a
volatile session, as investors awaited the verdict of the U.S.
Federal Reserve on a potential new round of quantitative easing
later this week.
The Stoxx Europe 600 index kicked off the first session of the
month on a choppy note, fluctuating between gains and losses all
morning. But as the afternoon set in, it turned decidedly higher,
up 0.5% to 267.21, as investors cheered better-than-expected U.S.
manufacturing data.
The index of manufacturing activity, published by the Institute
for Supply Management, rose to 56.9% in October from 54.4% in
September. It had been expected to decline to 54%.
The surprise improvement gave a further lift to a mining sector
already buoyed by strong Chinese manufacturing data published
overnight. Xstrata PLC and Kazakhmys PLC gained more than 2%.
All sectors were in the green except for defensive utility
stocks.
The most important item on the agenda for markets this week is
the Fed's policy meeting on Tuesday and Wednesday, during which the
central bank is widely expected to unveil another leg of
quantitative easing. What is in doubt, however, is the scale and
time frame of the bond purchases. Markets are likely to trade in a
relatively tight range until the decision is announced.
Heino Ruland, market strategist at Ruland Research, said that
investors are very much playing the latest macroeconomic data,
betting that the better they come, the lower the amount of
quantitative easing the Fed will go for.
While some, like Goldman Sachs, have estimated the new
quantitative-easing round may reach up to $2 trillion, Ruland
believes it will be less.
"If they come up with $2 trillion, they're confessing that the
U.S. economy is in deep trouble. We think that one trillion is
sufficient, it's a sort of wait-and-see level without being too
dramatic and still leaves them with some way to go in case the
assumption of a stabilizing economy turns out to be wrong," he
said.
U.S. mid-term elections that could shift control of Congress to
Republicans on Tuesday are adding to the uncertainty.
Vivendi weighs on French index; Portuguese stocks rally
Back in Europe, Germany's DAX 30 rose 0.3% to 6,623.87 and
France's CAC 40 index gained 0.4% to 3,847.50. Although these
markets are open, Monday is a public holiday and trading was
thinner than normal.
In Paris, shares of Vivendi SA declined 1.4% after UBS cut its
rating on the telecommunications, media and video-games
conglomerate to neutral, saying its mobile division faces
increasing competition from France Telecom.(FTE)(FTE)(FTE)
Also in the telecoms sector, shares of Telenor gained 2.9% in
Oslo after an upgrade to overweight from Barclays Capital on strong
cash-flow generation and emerging-market exposure.
In Germany, shares of truck maker Man gained 1.8% after it was
upgraded to buy at Royal Bank of Scotland on the expected continued
recovery in the global truck market.
The U.K.'s FTSE 100 index advanced 0.7% to 5,712.37, supported
by the heavily represented commodity sector.
Shares of recruitment companies Hays PLC and Michael Page
International rose more than 3% after Credit Suisse raised its
recommendation on both stocks to outperform from neutral, citing
their focus on international operations.
A notable loser in Britain, however, was Ryanair Holdings PLC
(RYAAY). Shares of Europe's largest low-cost airline fell 3.2%
after it reported a 32% increase in second-quarter profit but
cautioned it has little visibility on ticket prices in the fourth
quarter.
One regional market in focus Monday was Portugal. Portuguese
stocks posted solid gains, with the PSI 20 Index climbing 1.1% to
8,172.14, after the government and the opposition party reached an
agreement on the budget for 2011. Portugal has been under pressure
to drastically cut expenses to bring its deficit under control.
In the Netherlands, shares of postal and express-shipping group
TNT slumped 4.7% after it reported lower-than-expected profit in
the third quarter on price competition in its express business.