* FTSEurofirst 300 up 0.2 percent
* Basic resources higher on China boost
* STMicroelectronics ends tie-up with Ericsson
* Banks down on Italy political worries
By David Brett
LONDON, Dec 10 Blue chip shares in France,
Germany and the UK helped European stocks close higher on
Monday, as political turmoil in Italy unnerved investors and
prompted a flight to safety.
The FTSEurofirst 300 closed up 1.84 points, or 0.2
percent at 1,134.53, supported by gains on Germany's DAX
and Britain's FTSE 100. Basic resource stocks
were the top risers after China reported overnight that
its economic recovery remained intact.
French-Italian company STMicroelectronics was the
top performer in Europe, up 4.4 percent after it announced plans
to quit a loss-making joint venture with Ericsson,
which helped the French CAC outperform regional peers.
Periphery Europe, however, came under pressure with Italy's
FTSE MIB down 2.2 percent and the spread between
10-year Italian debt and German Bunds widening after Mario Monti
announced he would resign once the 2013 budget is passed.
Traders said former Prime Minister Silvio Berlusconi's
declared intention to run for office also raised worries that
had been bubbling under the surface over political and financial
instability in the country.
"There is a clear risk whatever the outcome (of the
elections), in the end, the market will be forced into thinking
that things are not under control and then the European Central
Bank has to intervene," said Nicola Marinelli, portfolio manager
at Glendevon King Asset Management.
Monti imposed tax hikes and spending cuts to bring borrowing
costs under control and undertook a series of reforms to improve
the competitiveness of the economy, which had calmed markets.
But Berlusconi said the former economics professor and
European Commissioner's austerity policies had left Italy facing
a "recessive spiral without end" and that he had been "besieged"
by his party to run for office.
Stocks of companies with direct exposure to the country's
debt fell most sharply, with banks down 0.9 percent.
Top fallers were Italian lenders: Intesa Sanpaolo
lost 5.2 percent, Banco Popolare was down 5.7 percent
and UniCredit down 5.2 percent.
There was a marked difference in investor interest in euro
zone equities, with the region's blue chip index
down 0.2 percent having traded at 130 percent of its average
90-day daily volume. That compared with Britain's FTSE 100
, which traded just 65 percent of its 90-day daily
Spain's leading share index fell 0.6 percent as the
decision by Mario Monti posed the question of contagion within
the debt-ridden euro zone periphery.
"If markets do become unsettled over Italy we may see
contagion into other euro zone economies," analysts at Nomura
said in a note.
"Particularly Spain, which has tended to move in tandem with
Italy since August 2011 and which faces a heavy year of debt
refinancing in 2013, starting in January, against a backdrop of
continuing uncertainty over whether prime minister Mariano Rajoy
will seek a country bail-out or not," Nomura said.
Investors' appetite for equities remains undiminished
approaching the year end, however, with the FTSEurofirst having
added more than 6 percent in the last 15 trading days and
setting fresh 2012 highs along the way.
Returns attractive compared with other asset classes
-European equities are yielding around 4 percent, compared with
"safer" bonds on around 2 percent and cash close to zero.
"The world is obviously not without risks, however ...
investors should be moving their assets out of cash and other
low-yielding assets and into securities offering returns beyond
inflation," Dan Morris, global strategist at J.P. Morgan Asset
Management, said in a note.
"Equity valuations remain attractive, company earnings
continue to grow, and many types of fixed income offer generous
yields relative to core sovereign debt," he said.