European shares close flat; banks gain on Greece aid

By Harpreet Bhal

LONDON (BestGrowthStock) – European shares ended flat on Monday, with banks gaining after a rescue package for Greece helped soothed some nerves over Athens’ debt problems, while miners fell as metals prices retreated from earlier highs.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares closed flat at 1,101.44 points after rising to 1,105.08 — its highest in more than 18 months. The index closed 1.3 percent higher on Friday, notching up its sixth straight week of gains.

The European benchmark is up around 5 percent this year and has surged 71 percent from its record low in March 2009.

Banks were in favor after euro zone finance ministers agreed on Sunday to a 30 billion euro emergency aid package for Greece if it requests help, with the International Monetary Fund expected to supply a further 15 billion euros in the first year.

Barclays (BARC.L: ), HSBC (HSBA.L: ), Societe Generale (SOGN.PA: ), BNP Paribas (BNPP.PA: ) and Deutsche Bank (DBKGn.DE: ) rose 0.6 to 2.3 percent, while Greek banks (.FTATBNK: ) added 5.7 percent.

“In the short term there are chances of a certain easing of fears. However, in the medium term, any real improvement in the tensions within the European Monetary Union needs to see the underlying causes being addressed,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.

The aid mechanism allows Greece to borrow from euro zone peers and the IMF at well below market rates, but questions remained over whether Greece would use the bailout fund, how it would be activated, and how Athens would cope with its 300 billion euro debt mountain in the longer term.

“No aid package can address the underlying issues. It can buy time and that is what this aid package does. The decision is no green light for medium term equity investments,” Greetfeld said.

Among individual movers, UBS (UBSN.VX: ) rose 3.1 percent after it delivered its highest pretax profit since the start of the credit crisis began.

Home Retail (HOME.L: ) jumped 4.9 percent after a Sunday newspaper said the British company might be a bid target for Wal Mart-owned (WMT.N: ) grocer Asda, which declined to comment.

On the downside, Essilor International (ESSI.PA: ) fell 2.5 percent, pressured by a recommendation downgrade by BNP Paribas to “neutral” from “outperform.”

MINERS RETREAT

Mining stocks were under pressure, reversing gains from the previous sessions, as copper prices eased off a 20-month high hit earlier.

Anglo American (AAL.L: ), Eurasian Natural Resources (ENRC.L: ), Kazakhmys (KAZ.L: ), BHP Billiton (BLT.L: ), Xstrata (XTA.L: ) and Rio Tinto (RIO.L: ) shed 0.2 to 1.3 percent.

Investors are likely to focus on the first quarter corporate earnings season which kicks off in the United States, with Alcoa Inc (AA.N: ) expected to report earnings after Wall Street closes on Monday.

“The big test for the market will come over the course of next few days when we fully get into the first quarter earnings season. The ability of companies to meet or exceed analysts’ expectations will probably determine where the markets go in the short term,” said Henk Potts, equity strategist at Barclays Wealth.

Across Europe, Britain’s FTSE 100 index (.FTSE: ) rose 0.1 percent, while Germany’s DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) closed flat.

(Additional reporting by Atul Prakash; editing by Simon Jessop)

European shares close flat; banks gain on Greece aid