Europe shares drift higher; defensive stocks gain

Published 10/21/2010, 05:08 AM
Updated 10/21/2010, 05:12 AM

* FTSEurofirst 300 index rises 0.1 percent

* Defensive shares in demand; financials weak

* Credit Suisse slips after saying net profit falls

* For up-to-the-minute market news, click on

By Atul Prakash

LONDON, Oct 21 (Reuters) - European stocks rose on Thursday as uncertainties about company earnings and economic numbers prompted investors to take shelter in food, beverages and personal goods shares, traditionally seen as defensive equities.

At 0842 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,087.45 points after falling as low as 1,079.88 points earlier in the session and closing 0.3 percent higher in the previous session.

Food and beverages shares topped the gainers list, with the European sector index rising 1.2 percent after soft drinks maker Britvic said its 52-week revenue grew 14.6 percent on higher volumes.

Britvic jumped more than 4 percent, while Unilever, Associated British Foods and Marine Harvest were up 1.8 to 2.6 percent.

Investors awaited more earnings results on Thursday after Morgan Stanley reported a surprise loss on Wednesday and Credit Suisse reported on Thursday that its third-quarter net profit tumbled 74 percent to miss forecasts. Credit Suisse shares were down 3.4 percent.

"Caution is still a watchword and we certainly remain very data-sensitive," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"But, we have got the prospect of further central bank actions in the background and China has certainly not fallen off the cliff as many people had predicted. There are still some grounds for optimism."

China's growth ebbed in the third quarter while inflation edged just a touch higher, showing that the world's second-largest economy was strong but far from overheating and suggesting that an interest rate rise this week may be enough for now.

Personal and household shares, generally seen as defensive plays, were in demand. The sector index rose 0.7 percent, with Swatch Group, Taylor Wimpey and Imperial Tobacco rising 1.6 to 2.4 percent.

Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 rose 0.4 to 0.5 percent.

FINANCIALS DOWN

Banking shares came under pressure as Credit Suisse said third-quarter net profit slipped as sluggish equities trading halved investment banking earnings from the previous quarter.

The STOXX Europe 600 banking index fell 0.2 percent, while Standard Chartered, Natixis and BBVA dropped 0.2 to 1.1 percent.

However, Sweden's Swedbank jumped more than 5 percent after posting stronger-than-expected third-quarter operating profit on sharply lower credit losses and a return to profit in the Baltics for the first time since late 2008.

"Swedbank is clearly overcoming a lot of funding risk through the last year ... but we believe that the trough has been reached and normalisation of funding costs over the coming years will be a positive rather than a negative driver," Chintan Joshi, analyst at Nomura, said in a research note.

Investors awaited results from Nokia, the world's largest mobile phone maker, and from U.S. firm Caterpillar for clues about near-term market direction.

Focus will also be on the latest weekly U.S. jobless claims numbers, due at 1230 GMT, for fresh pointers about the health of the world's biggest economy.

Among individual movers, TUI Travel fell more than 7 percent. Europe's largest travel company restated 2009 results and said its finance chief will go after stumbling across 117 million pounds ($185 million) owed by customers that will now have to be written off.

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