* FTSEurofirst 300 index ends 1.9 pct higher
* Energy shares rise tracking firmer crude oil prices
* Automobile shares skid on falling car demand
By Atul Prakash
LONDON, Jan 5 (Reuters) - European equities closed higher
for the fifth session in a row on Monday, as stronger telecom
shares and energy stocks boosted by a higher crude oil price
outpaced weaker automobiles, which were hit by falling car
demand.
The FTSEurofirst 300 <> index of top European shares
rose 1.9 percent to 873.01 points, the highest close since
mid-November last year. It plunged 45 percent in 2008, but is up
16 percent since hitting a 5-1/2-year low last November.
Telecoms were one of the biggest gainers on the first full
day of 2009 for many, with Swisscom <SCMN.VX> rising 5 percent,
Cable and Wireless <CW.L> adding 4.6 percent, Vodafone <VOD.L>
up 4.4 percent and Portugal Telecom <PTC.LS> rising 4.6 percent.
The market drew strength from news that U.S. President-elect
Barack Obama was seeking as much as $310 billion in tax cuts as
part of a massive stimulus plan to counter what policymakers
warned could be a prolonged period of economic stagnation and
deflation. []
In Germany, Chancellor Angela Merkel met her coalition
partners to discuss a second fiscal stimulus deal worth up to 50
billion euros ($69.63 billion) on top of last year's 31 billion
euro package.
But analysts remained cautious and said the markets faced
another difficult year after posting record declines in 2008,
hit by a credit crisis that began with U.S. mortgage defaults in
2007 and threatens much of the world with deep recession.
"The outlook is not really encouraging. We would anticipate
that there is still going to be a lot of bad news out there that
will be reflected in reduced valuations across all sectors,"
said Neil Parker, market strategist at Royal Bank of Scotland.
"We have to get through the year-end reporting season, and
once we really know how badly affected a lot of businesses have
been from the global slowdown, then we will be able to make a
better judgement on how balance sheets and how profitability
will be affected throughout 2009 and into 2010."
Citigroup downgraded European banking, chemicals, financial
services, technology and industrial goods and services sectors
to "underweight," saying firms will find it difficult to grow in
2009 with resilience in earnings and dividends seen to be rare.
ENERGY SHARES UP, AUTOS SKID
But energy stocks tracked crude prices <CLc1>, which rose
more than 2 percent. BP <BP.L>, BG Group <BG.L> and Tullow Oil
<TLW.L> added between 1.3 and 4.1 percent.
Banks were mixed, with Credit Suisse <CSGN.VX> jumping 12
percent, UBS <UBSN.VX> up 7.6 percent and Standard Chartered
<STAN.L> adding 6.2 percent. But HBOS <HBOS.L> lost more than 9
percent and Lloyds TSB <LLOY.L> slipped 3.3 percent.
Defensive pharmaceutical shares were in demand, with UCB
<UCB.BR> rising 4.5 percent, Roche <ROG.VX> gaining 3.8 percent
and Novartis <NOVN.VX> adding 2.5 percent.
"It is a very different start from January last year. We are
clearly coming off one of the worst years in history so we would
expect to see a positive start," said Darren Winder, strategist
at Cazenove. "Investors are trying to be more positive because
of the severity of 2008," he added.
Data showed investor sentiment in the euro zone improved in
January, Spanish inflation in December was the lowest for a
decade and Italian inflation fell to a 14-month low, putting
pressure on the European Central Bank to keep cutting interest
rates.
A Reuters poll showed that the Bank of England is expected
to slash interest rates by another 50 basis points to a record
low when it meets on Thursday as evidence piles up that the
British economy has slumped into a deep recession.
Automobile shares were under pressure, with France and Japan
posting steep falls in December car sales, adding to a swathe of
depressing data from an industry bearing the brunt of wrecked
consumer confidence.
BMW <BMWG.DE>, Daimler AG <DAIGn.DE>, Porsche <PSHG_p.DE>,
Volkswagen AG <VOWG.DE>, Peugeot <PEUP.PA> and Renault <RENA.PA>
were down between 1.7 and 6.6 percent.
Shares in German chipmaker Infineon Technologies <IFXGn.DE>
jumped 13.4 percent on hopes a proposed multi-million euro share
issue by the company will bolster its finances.
Across Europe, the FTSE 100 index <>, Germany's DAX
<> and France's CAC 40 <> rose 0.2 to 0.4 percent.
(Additional reporting by Phakamisa Ndzamela and Joanne
Frearson; Editing by Erica Billingham)
