By Peter Starck
FRANKFURT, Jan 31 (Reuters) - Europe's top stock market
index closed flat on Thursday after a late rally sparked partly
by gains on Wall Street, with mobile phone maker Nokia's
<NOK1V.HE> advance offsetting losses for bank UBS <UBSN.VX>.
The FTSEurofirst 300 <> index of top European shares
ended 0.01 percent higher at 1,329.53 points, having lost as
much as 2.6 percent in intra-day trading.
For January as a whole, the index fell 11.8 percent.
"The mood was bad the whole day," one Frankfurt-based trader
said. Speaking almost immediately after the markets' close, he
said there was no clear reason for the last-minute recovery.
"There's little to suggest that the rampant volatility we've
seen of late will be disappearing any time soon," CMC Markets
said in a note.
Concern about still more write-downs at banks and insurers
dominated most of the session, but European financials trimmed
more than half of their intra-day losses after U.S. bond insurer
MBIA Inc's <MBI.N> chief financial officer said rating agency
Standard & Poor's has indicated that MBIA's capital plan was
sufficient for a triple-A rating.
The news triggered a turnaround in U.S. stock markets, whose
leading indexes <> <.SPX> <> moved into positive
territory shortly before the European trading day ended
The DJ Stoxx European banks index <.SX7P> and the insurance
index <.SXIP> both lost 1.4 percent, having fallen more than 4.5
percent earlier in the day.
Shares in UBS, at one point down as much as 10 percent after
Switzerland's banking watchdog said UBS and rival Credit Suisse
<CSGN.VX> could face more write-downs, closed 3.8 percent lower.
UBS on Wednesday announced a shock $4 billion write-down.
"In addition to the loss of confidence, we see the danger of
continued negative newsflow this year du to the (bank's)
persistently high subprime exposure," UniCredit said, cutting
its price target for UBS to 54 Swiss francs from 62.
Morgan Stanley moved UBS to "underweight" from
"equal-weight" and cut its target price to 48 francs from 52.
CRISIS NOT OVER
"More bad news from the European banking sector is a signal
that the credit crisis is far from over," Olaf Siedler, European
equities fund manager at Schroder Investment Management, said.
Credit Suisse shares fell 0.9 percent and Deutsche Bank
<DBKGn.DE> dropped 2.1 percent. Traders cited market talk of a
profit warning from Germany's biggest bank, which is due to
report fourth-quarter and full-year 2007 earnings on Feb. 7.
Deutsche Bank declined to comment.
French bank Societe Generale <SOGN.PA>, which disclosed a
rogue trader scandal last week, saw its shares climb 1.7 percent
after BNP Paribas <BNPP.PA>, another French bank, said it was
studying a possible takeover bid. BNP shares fell 1.5 percent.
Goldman Sachs said its latest quarterly Chief Executive
Officer confidence survey showed that the outlook for corporate
mergers and acquisitions (M&A) had deteriorated sharply.
"Fears are especially acute in the financials sector, where
one banker says that M&A will only happen as 'rescue M&A',"
Goldman Sachs said in a note.
Shares in mining group Rio Tinto <RIO.L> <RIO.AX> rose 2.8
percent in London on expectations that rival BHP Billiton
<BLT.L> <BHP.AX> was poised to launch a slightly sweeter offer
than it proposed last November.
BHP Billiton rose 2.1 percent and Anglo American <AAL.L>
advanced 3.2 percent, making the basic resources index <.SXPP>
one of the day's best performing European sectors with a rise of
1.8 percent.
Nokia was the top blue-chip gainer, up 3.3 percent.
"Nokia has strong profitability in virtually every geography
and handsets continue to appear relatively insensitive to
greater macro fluctuations," JPMorgan said in a research note,
reiterating its "overweight" rating on the stock.
European Commission data released on Thursday showed euro
zone economic sentiment at its weakest in two years and a long
way below market expectations.
"The turmoil on the financial markets has further undermined
euro zone confidence, making a serious slowdown in the region
all the more likely," Commerzbank said in a note.
In Germany, Europe's biggest economy and the world's number
one exporter, profits for firms in the top-30 DAX index <>
would fall 18 percent this year, said FrankfurtFinanz analyst
Heino Ruland, who expects a U.S. recession to dent global
growth, with particular emphasis on exporters such as Germany.
(Additional reporting by Anshuman Daga and Sitaraman Shankar in
London)
