By Peter Starck
FRANKFURT, May 12 (Reuters) - European shares rose in quiet
trade on Monday led by HSBC <HSBA.L>, Europe's biggest bank, on
better-than-expected results, and energy stocks on the back of
high crude oil prices.
HSBC rose 1.9 percent after reporting a year-on-year rise in
quarterly profit as growth in Asia and elsewhere helped counter
a $3.2 billion bad-debt charge related to its U.S. consumer
finance business. Some analysts had expected a quarterly loss.
"Group profit up on Q1, 2007...is a claim few banks in
Europe will be able to make," Collins Stewart said in a note.
"HSBC remains a safe haven and core holding for us."
Collins Stewart rates HSBC "buy" with a target price of 999
pence.
HSBC shares were the biggest positive weight on the
FTSEurofirst 300 <> index of top European shares, which
rose 0.3 percent to 1,346.47 points, after posting its first
weekly loss in a month last week.
Volumes were thin on Monday due to a partial holiday in many
European countries. "Mostly we've been watching Wall Street,"
one Germany-based trader said.
Energy stocks underpinned the gains, with France's Total
<TOTF.PA> up 1.4 percent and BP <BP.L> 1.1 percent higher. U.S.
June crude oil futures <CLM8> hit a record $126.40 a barrel
while Brent <LCOc1> remained in sight of Friday's record highs.
"The high oil price is helping the oil sector and the
commodity sector is also doing well, but the more the oil price
rises, the more it becomes a problem for the overall economy so
it's not universally bullish," said Ronan Carr, equity analyst
at Morgan Stanley.
Overall, Morgan Stanley said investors should be cautious.
"This is strength to sell into. We think we are very early
in the downgrade cycle," the U.S. investment bank said in a
European equity strategy note.
RIGHTS ISSUE?
The FTSEurofirst has risen 12.3 percent since hitting a
2-1/2 year low in mid-March but remains down 10.5 percent for
the year to date.
On Monday, gainers on the index outnumbered losers by about
three to two.
Among heavyweight decliners, Barclays <BARC.L> fell 1.5
percent ahead of an interim trading update on Thursday expected
to disclose whether the British bank plans to go ahead with a
rights issue.
"We expect Barclays' ... statement on May 15 to provide the
catalyst for a wave of earnings downgrades," Citigroup said,
cutting its price target to 350 pence from 400 pence and
reiterating its "sell" recommendation.
"With uncertainty remaining over financial exposures and the
group's balance sheet strength, we expect the shares to remain
under pressure," Citigroup said in a note.
German steelmaker Salzgitter <SZGG.DE> rose 4.5 percent to
141 euros after Credit Suisse raised its price target to 201
euros from 189 euros.
Shares in fellow steelmaker ThyssenKrupp <TKAG.DE> rose 2.9
percent. Cazenove upgraded the stock to "in line" from
"underperform".
French luxury goods group Hermes <HRMS.PA> gained 6 percent
as traders cited market speculation of stakebuilding in the
maker of silk scarves and Birkin handbags. Officials at Hermes
could not be immediately reached for comment.
British mid-cap Chloride Group <CHLD.L> jumped almost 35
percent after the company, whose products protect against power
shortages, said it had rejected a takeover approach, which it
said materially undervalued it.
(Additional reporting by Blaise Robinson in Paris and Toni
Vorobyova in London; editing by Sue Thomas)
