Financials, miners lift European stocks; payday for Carillion shorts

* STOXX, blue chips both up 0.4 pct at close

* Banks underpin gains, basic resources turn positive

* UK mid-cap Carillion crashes 39 pct after profit warning

* Moeller-Maersk hits 14-mth high on Goldman note
(Adds detail, updates prices at close)

By Helen Reid and Kit Rees

LONDON, July 10 (Reuters) – European stocks closed higher on
Monday, underpinned by financials and basic resources, as
mergers and acquisitions rumbled on with some broker notes also
prompting individual stock moves.

The pan-European STOXX 600 was up 0.4 percent at
its close, rising in concert with euro zone stocks and
blue-chips. Strong gains in banks led by
Bank of Ireland boosted the benchmarks, while basic
resources reversed course to trade higher as metals
prices firmed.

Outside the main blue chips, UK midcap construction support
services company Carillion grabbed traders’ attention
after a profit warning and CEO exit sent its shares tumbling
nearly 40 percent in heavy volumes.

Carillion shares are among the most heavily shorted across
the UK market with hedge funds including Marshall Wace and Naya
Capital reporting sizeable bearish bets according to FCA
disclosure data.

The worst-performing European stock was infrastructure
company Balfour Beatty, down more than 3 percent as
traders read across from Carillion.

Shipping company Moeller-Maersk jumped 4
percent to a 14-month high and was among top STOXX gainers after
Goldman Sachs raised its forecast for it and peer Hapag
, on an analysis of shipping rates.

The broker however estimated a recent cyber-attack could
take a $150-200 million chunk out of Maersk’s revenue in the
third quarter, leaving its overall profit forecast for the firm
unchanged at $1.5 billion.

PostNL was the biggest riser, up more than 4
percent after the outgoing Dutch economy minister Henk Kamp
suggested that regulatory changes were needed in Dutch postal
services.

CHR Hansen gained 1.5 percent after a raise to
“buy” from Goldman Sachs, which said the company had strong
pricing power.

The broker found input costs for European consumer staples
increased 13 percent year-to-date versus 2016, suggesting 2017
would be the first year of input cost inflation since 2011,
helping drive firmer pricing.

“As input costs rise, we prefer companies with pricing power
(from high gross margins or concentrated market structure)
and/or self-help opportunities,” analysts at Goldman said.

Food and beverage companies were one of the
best-performing sectors, up nearly 1 percent.

German utility E.ON rose 2.2 percent, a
top-performer in the buoyant utilities sector after HSBC
said recent weakness offered an “excellent buying opportunity”,
raising the stock to a ‘buy’ from ‘reduce’.

Analysts at UBS said that although relative outperformance
of European versus U.S. equities has slowed recently, they saw
the region regaining momentum as monetary policy began to
tighten.

“Europe craves higher rates and U.S. bond yields,” they
wrote, pointing to the region’s higher weighting in materials,
industrials, financials and energy, against U.S. equities’
concentration in technology and consumer discretionary sectors
more suited to lower rates.

(Reporting by Helen Reid and Kit Rees Editing by Jeremy Gaunt)


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