By Aude Lagorce
LONDON (MarketWatch) -- European bourses ended slightly higher
Monday after a volatile session, as investors awaited a verdict
later this week from the U.S. Federal Reserve on a potential new
round of quantitative easing.
The Stoxx Europe 600 index closed up 0.2% at 266.40. The index
kicked off the first session of the month on a choppy note,
fluctuating between gains and losses all morning. But as afternoon
set in, it turned higher, 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%.
That surprise improvement gave a further lift to a mining sector
already buoyed by strong Chinese manufacturing data published
overnight. Xstrata PLC rallied 3.7% and Kazakhmys PLC gained
1.8%.
The most important item on the agenda for markets this week is
the Fed's policy meeting 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 its bond purchases. Markets are likely to trade in a
relatively tight range until the decision is announced.
Heino Ruland, a market strategist at Ruland Research, said
investors are very much playing the latest macroeconomic data,
betting that the better they are, the lesser 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, he said.
"If they come up with $2 trillion, they're confessing that the
U.S. economy is in deep trouble. We think that $1 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. midterm elections that could shift control of Congress to
Republicans on Tuesday are adding to the uncertainty.
Vivendi drops in Paris; Portugal gains
Back in Europe, Germany's DAX 30 edged up 0.05% to 6,604.86 and
France's CAC 40 index gained 0.2% to 3,841.11.
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 telecoms, shares of Telenor gained nearly 3% in Oslo
after an upgrade to overweight from Barclays Capital on strong
cash-flow generation and emerging-markets exposure.
In Germany, shares of truck maker Man gained 2% after the stock
was upgraded to buy at Royal Bank of Scotland on the expected
continuation of a recovery in the global truck market.
The U.K.'s FTSE 100 index advanced 0.3% to 5,694.62, supported
by the heavily represented commodity sector.
Shares of recruitment companies Hays PLC and Michael Page
International rose 3% and 4%, respectively, 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 3.7%
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, where the PSI
20 index climbed 0.5%, 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 4.2% after it reported lower-than-expected profit in
the third quarter on price competition in its express business.
Stocks in Greece, Italy and Spain bucked the positive trend to
finish lower.
In Madrid, the IBEX-35 stock index fell 1.5%, led lower by the
banking sector. Shares of Banco Santander slumped 3%, and those of
rival BBVA (BBVA) declined 3.6%.
The Greek ASE Composite index dropped 2.8%, and the Italian FTSE
MIB index fell 1.2%.