* Indexes struggle to break through multi-month highs
* Earnings boost lifts Unilever, Novartis
* Telecoms fall on outlook worries
* Takeover chat boosts United Utilities
By David Brett
LONDON, Jan 23 European shares stuck to tight
trading ranges on Wednesday, hovering near multi-month highs as
investors traded cautiously at the start of what could be a
mixed earnings season.
By 1151 GMT, the FTSEurofirst 300 was down 0.57 of
a point at 1,164.92.
The index has traded in little more than a 10-point range
since Jan 3, and Germany's DAX and the euro zone's blue
chip Euro STOXX 50 index have been stuck in a
Spain's and Italy's top shares have
performed better, suggesting investors are beginning to believe
the dangers from Europe's debt crisis are receding.
But Peter Garnry, Equity Strategist at Saxo, said he would
wait for a pullback before investing fresh money.
"The rally over the past few months has been extended with
very few setbacks. It almost feels too much and normally that
would trigger a minor correction, we think that might be of
about 5-10 percent, which is nothing to be scared about and in
the longer term if you are long equities you will make money
this year," he said.
Bullish earnings from numbers from Unilever and Novartis
were offset by caution surrounding the outlook for telecom
Unilever , up 2.9 percent, surged to a
record high after the Anglo-Dutch consumer goods group reported
a rise in sales that beat market forecasts.
"They've put in a stellar set of results. I will definitely
be a buyer of the stock but not at these levels, where it's
looking overbought," says Hartmann Capital trader Basil
Novartis was not too far behind, up 2.5 percent,
after saying it expects sales growth in the mid-single digit
percent from 2014.
According to Thomson Reuters StarMine, out of 13 percent
companies on the S&P 500 index 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
TELECOMS TOUGH CALL
But with margins and price-to-earnings ratios close to
post-credit-crisis highs, companies need to improve their
performances to justify premium ratings.
"The bull market has been driven by belief ... that things
are going to be better. That needs to be confirmed by an
improvement in earnings (and) ... this will take time," a
European-based analyst said.
Some of the concerns are focused on the telecoms sector
, which underperformed the broader market by around 19
percent in 2012.
JP Morgan does not expect the sector to repeat that
performance but warned that fourth quarter results "could
further challenge 2013 expectations.
"... Mobile service revenues and other trends further
deteriorate, and we believe is far too soon to see tangible
reward for fibre investments," it said.
Dutch telecoms firm KPN was down 2.0 percent as
Citigroup cut its rating to "neutral" from "buy".
France Telecom fell 3.2 percent as Bernstein cut
its rating to "underperform" from "marketperform", saying it
expects the combination of earnings downgrades, negative
re-ratings and dividend uncertainty to continue.
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.
M&A chat helped drive United Utilities, with traders
citing a report in the Daily Telegraph that the firm could be
the target of a bid from a consortium of infrastructure funds.
Tui Travel fell 4.4 percent after its parent company
Tui AG ruled out an offer for the UK firm.