European shares flat; miners dip, Spanish banks up

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European shares were little changed by midday trade on Thursday after 28-month highs a day earlier as miner-led declines and some market consolidation offset a good response to Spain’s bond auction.

The market was waiting for a news conference starting at 1330 GMT by ECB President Jean-Claude Trichet, who will talk about the reasoning behind the bank’s decision to hold rates unchanged.

The Bank of England also left its interest rates unchanged.

Analysts said the Spanish auction results were broadly priced in, with investors taking profits earlier in the session.

Mining shares were among the top decliners as key base metals prices fell. Copper slipped after two days of strong gains on worries about waning demand in top metals consumer China, which approaches towards its new year holidays.

The STOXX Europe 600 Basic Materials index .SXPP fell 0.9 percent, while Antofagasta (ANTO.L) dropped 1.3 percent.

At 1249 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was little changed at 1,163.75 points after jumping 1.5 percent to a 28-month high in the previous session.

“The auctions are no longer a market influencing factor as people know that the ECB is there to support the auctions and, for the time being, the auctions are going to go well,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

“These auctions, when they go well will not necessarily help the market going forward any more. But if they go wrong, they will have severe negative repercussion on the market.” Spain attracted strong demand at the auction of five-year bonds, while the yield came in lower than expected, reflecting growing hopes that euro zone governments will take fresh action to ease the region’s debt crisis.

Analysts said that the euro zone debt crisis was not going to be resolved in the near term, but would allow the peripheral European governments to implement austerity measures and bring down debt levels.

Spanish banks rose sharply after the bond auction. Banco Santander (SAN.MC) and BBVA (BBVA.MC) climbed 4.7 percent and 6.8 percent respectively, while Spain’s IBEX35 .IBEX rose 2.6 percent.

“There’s a bit of consolidation going on,” a London-based trader said, “and the volumes are not that great and the retail results were mixed.”

Tesco (TSCO.L) fell 2.4 percent after the world’s No.3 retailer missed Christmas sales forecasts, saying disruption from severe winter weather hit sales of non-food goods in its main British market. [ID:nLDE70C0G7]

Investors waited for U.S. weekly jobless claims after a recent pick up in U.S. economic data that prompted a number of economists to lift growth forecasts. [ID:nN12190516]

Among individual movers, Spain’s Repsol (REP.MC) rose 4.7 percent after reports India’s Essar group is studying an acquisition of 5 percent of the company. [ID:nSGE70CB3K]

Home Retail (HOME.L) gained 9.2 percent as the owner of the Argos catalogue chain said sales have fallen less than analyst forecasts.

Across Europe, Britain’s FTSE 100 .FTSE fell 0.3 percent, Germany’s DAX .GDAXI was flat and France’s CAC40 .FCHI rose 0.4 percent.
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This post was submitted by Mudit Agrawal.

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