European shares flirt with 2-wk highs before U.S. payrolls

Fri Nov 2, 2012 5:19pm IST

* FTSEurofirst 300 up 0.2 pct
    * Scope for further gains if U.S. jobs data strong
    * Dividend concerns hit telecoms sector

    By Toni Vorobyova
    LONDON, Nov 2 (Reuters) - European stocks flirted with
two-week highs on Friday, supported by hopes a U.S. job report
will reassure about the health of the world's biggest economy,
opening the door to more gains.
    Prospects for a strong reading on U.S. non-farm payrolls -
the last major data before next week's presidential elections -
were fanned by a better than expected ADP private sector
employment report and ISM manufacturing index. 
    "It looks ...as if the final quarter of the year might be
getting off to a good start," said Mike Lenhoff, chief
strategist at Brewin Dolphin. "If the (payrolls) number comes in
at least as expected, or better, then I think we are going to
see a big move on Wall Street and in Europe too."
    The pan-European FTSEurofirst 300 touched a
two-week high of 1,112.93 points before trimming gains to trade
up 0.2 percent at 1,111.80 by 1119 GMT.
    Telecoms were the hardest hit, with the sector off 0.8
percent after a media report that Deutsche Telekom
 is considering cutting its dividend by up to a third
from 2013. 
    Following payout reductions by peers like France Telecom
 and Telefonica, the news further eroded
sentiment towards a sector once loved for its high dividends.
    The EuroSTOXX 50 index of euro zone blue chips edged 0.1
percent lower to 2,530.26 points, off the previous session's
intra-day high of 2,541.87.
    A non-farm payrolls number above the 125,000 consensus at
1230 GMT could push EuroSTOXX 50 towards the top of the 165
point range of around 2,440 to 2,605 it has held to since
mid-September.
    U.S. economic health has become increasingly key for
European companies as the region stutters due to the debt
crisis. Third quarter earnings have underscored the divide.
    A 15 percent drop in revenues in Europe pushed telecom
equipment market Alcatel towards a bigger than
expected third quarter loss, shaving 6.6 percent off the share
price on Friday.
    On the flip side, skincare manufacturer Beiersdorf 
rallied 6 percent after raising its 2012 outlook thanks to a
strong performance in emerging markets. 
    With the third quarter earnings season half way through, 44
percent of companies in developed Europe have missed forecasts
and the remainder are expected to undershoot by on average 1.6
percent, according to Thomson Reuters Starmine data.    
 
    The mixed earnings have contributed to the recent stagnation
on Europe's share markets after a rally of more than 460 points
on a European Central Bank pledge to protect the euro. 
    With the EuroSTOXX 50 index up 9 percent since the start of
the year, a major catalyst may be needed to drive significant
further near-term gains.
    "I wouldn't be surprised if markets marked time a bit
between now and the end of the year ... There is a temptation
for a manager who has seen pretty decent gains so far in 2012 to
lock them in for the year."," said Robbie Kelleher, head of
global investment strategy at Davy Private Clients.
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