* FTSEurofirst flat
* Indexes struggling to break above multi-month highs
* Novartis, Unilever boosted by earnings
* Telecoms fall as brokers cut ratings on outlook worries
By David Brett
LONDON, Jan 23 European shares continued to
trade in a tight range as the FTSEurofirst 300 index lingered
around 22-month highs, with positive earnings from the likes of
Unilever and Novartis offsetting worries about telecoms.
By 0842 Europe's top shares were flat at 1,165.45.
The index, however, has traded in little more than a 10-point
range since Jan 3, while the Germany's DAX and the euro
zone's blue chip Euro STOXX 50 index have been stuck
in a 40-point range.
"Currently in the short-term we are in a trend confirming
consolidation. Eventually this will dissolve upwards and by the
end of the year we expect indexes to test fresh highs," Thorsten
Grisse, technical analyst at Commerzbank, said.
For the DAX that means highs last seen back in 2008, which
are about 4 percent away, but Grisse said the Euro STOXX 50 will
struggle to see 2010 highs, pegged by its weighting towards the
region's indebted banks and their exposure to the zone's debt
"The tops are more durable now and for sure 2013 will not be
as good a year as 2012," he said.
In Europe, Unilever led the gainers, up 2.7 percent
after the consumer goods company reported forecast beating
Novartis was not too far behind up 2.5 percent,
after saying it expects sales to grow in the mid-single digits
According to Thomson Reuters StarMine, out of 13 percent
companies on the S&P 500 index .SPX that have reported results
so far, 75 percent have met or beaten forecasts. In Europe, only
2 percent of all STOXX Europe 600 firms have announced
results, but 86 percent of them have met or beaten expectations.
Worries, however, remain over the outlook for the telcoms
sector, which underperformed the broader market by
around 19 percent in 2012.
While JP Morgan does not expect the sector to repeat that
performance its said: "Q4 results could further challenge 2013
expectations, as mobile service revenues and other trends
further deteriorate, and we believe is far too soon to see
tangible reward for fibre investments."
Dutch telecoms firm KPN was the top faller in
Europe, down 3.5 percent as Citigroup cut its rating on the
company to "neutral" from "buy".
France Telecom, meanwhile, fell 2.8 percent as
Bernstein cut its rating on the firm to "underperform" from
"marketperform" as it sees the combination of earnings
downgrades, negative re-ratings and dividend uncertainty set to
BT Group, however, outperformed, up 1.4 percent as
Bernstein upgraded the UK company and JP Morgan resumed coverage
of the firm with an "overweight" rating, with both mentioning
valuation and relatively few material risk as reasons to own the
Telecoms, rank among the lowest sectors in Europe in
Thomson Reuters StarMine's Analysts Revisions Model, which ranks
stocks based on analysts' revisions of earnings and revenue
estimates and changes in their recommendations.
There was M&A chat doing the rounds too helping drive United
Utilities up 1.7 percent, with traders citing a report in
the Daily Telegraph that the firm could be the target of a
multi-billion bid from a consortium of infrastructure funds.
Tui Travel, however, fell 3.8 percent after its
parent company Tui AG ruled out an offer for the UK
UBS said equities positioning remains modestly defensive,
but is beginning to turn.
"The positioning sub-component of our indicator moved very
little over the last two weeks, its level continuing to indicate
slightly below-average risk appetite," it said in a note.
"It has been rising steadily, however, since mid-November,
as investors have shown an increased appetite for cyclicals vs
defensives, and for higher-beta sectors (especially Financials)
and regions (especially Europe)," UBS said.