Banks help European shares as ECB talk dominates, offsetting tech slump

* Pan-European STOXX 600 index ends flat

* UniCredit, Bankia lead bank gainers

* Nestle boosted by 20 billion stock buyback plan

* Antivirus firm Sophos falls despite new global attack
(Writes through, adds details, closing prices)

By Danilo Masoni

MILAN, June 28 (Reuters) – European shares ended flat on
Wednesday as a third day of gains for banking stocks in a
session dominated by bets about future central bank action
offset a tech sell-off.

The STOXX 600 ended flat as further gains among
financials, which benefit from tighter monetary policy, drove
the pan-European index off a 2-month low hit in morning trading.

Investors remained focused on when the European Central Bank
would begin winding down its stimulus after comments on Tuesday
from President Mario Draghi that were taken as a hawkish swing,
lifting the euro and boosting banks.

Europe’s broader banking index rose 1.3 percent,
leading sectoral gainers in the region. Top gainer was Italy’s
UniCredit, up 4.1 percent, followed by Bankia
, which rose 4 percent, helped by a price target
upgrade at Berenberg one day after the Spanish lender bought
smaller peer BMN in a $924 million deal.

Utilities, which instead benefit from loose monetary
policy, fell 0.2 percent but came off lows after media reports
that Draghi’s remarks on Tuesday had been overinterpreted.

German utilities RWE and E.ON were
among the worst performers, down 2.4 and 1.3 percent
respectively.

A trader at a European brokerage said his firm was
overweight on banks, autos and consumer cyclicals on bets of
economic growth, but underweight on utilities and other sectors
like telecoms which suffer when interest rates rise.

Technology stocks fell 0.6 percent, taking their cue
from losses in U.S. peers in the previous session, with stocks
involved in cybersecurity and virus protection failing to get a
boost from the latest cyber attack that swept the globe.

Anti-virus provider Sophos fell 5.9 percent after a
downgrade from Cenkos to hold from buy that followed a 75
percent rally for the stock over the past six months.

“It was a ‘best idea’ and remains a core tech holding for
us. However, after such a run the prospect of further outsized
returns has significantly diminished in the near term,” Cenkos
analyst Martin O’Sullivan said in a note.

Nestle rose 1.3 percent, remaining close to record
highs, after the Swiss food giant said it planned a 20 billion
Swiss francs ($20.84 billion) share buyback, a few days after
activist shareholder Third Point began a campaign to boost
performance at the group.

“Nestle is still not targeting its full potential…This
leaves room for further accelerations and means activist
shareholders might continue to keep the high pressure on
Nestle,” said Baader Helvea analyst Andreas von Arx, who has a
buy rating on the stock.

Elsewhere, Tullow Oil rose 1.5 percent. The stock
had earlier fallen following the release of its first-half
results.

Business supplies distributor Bunzl bounced 1.5
percent after saying a boost in recent acquisitions would help
it increase first-half revenue 7 percent.
($1 = 0.9599 Swiss francs)
(Additional reporting by Helen Reid; editing by Mark Heinrich)


Leave a Reply