European shares flat as SAP gains on Oracle results

By Joanne Frearson

LONDON (Reuters) – European shares were flat on Friday, with fund managers suggesting the overall trend could be downwards in the short term as euro zone debt concerns persist.

European leaders at their two-day summit gave themselves until June to increase their temporary rescue fund for indebted eurozone countries, and some equity investors still remained concerned about euro zone sovereign debt problems after Standard & Poor’s downgraded Portugal by two notches on Thursday.

Economists suggested Portuguese yields were above levels that were deemed sustainable and a bailout was likely, though some analysts suggested this was increasingly being priced into equity markets and overall the Portugal market was small.

By 1214 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.02 percent at 1,123.75 points after rising earlier to its highest level since March 11, when a massive earther and tsunami hit Japan.

“The market was being helped by good company results and positive outlook statements, investors have been buying on dips,” Colin McLean, managing director at fund group SVM Asset Management in Edinburgh, which has 630 million pounds ($1.01 billion) assets under management, said.

“However, Europe’s issues are still not resolved and going into the second quarter there could be some weakness.”

The Peripheral Eurozone Countries Index slipped 0.2 percent.

On the upside, investors bought technology stock SAP which gained 2.2 percent as traders cited a positive read across from U.S. peer Oracle Corp after the business software results beat forecasts. SAP was the top performer on the German DAX which was down 0.1 percent, while elsewhere in Europe the FTSE 100

index rose 0.1 percent and France’s CAC 40 gained 0.1 percent.

But not all technology stocks were on the rise and Autonomy

slipped 2.4 percent after JPMorgan downgraded the software firm’s full-year 2012 earnings estimate.

BP FALLS

Elsewhere on the downside, BP fell 1 percent, after an arbitration panel blocked an alliance with the British oil major and Rosneft, Russia’s largest oil firm.

But, looking at the year-end equity view, analysts and managers were positive and a Reuters poll on Thursday suggested European shares would still be higher at the end of 2011.

Germany’s benchmark DAX index and France’s CAC 40 seen closing this year around 11 percent and 13 percent higher, respectively.

Meanwhile, equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 pricing forecast earnings at 10.2 times, below a 10-year average of 13.6, while the S&P 500 has a one-year forward price-earnings ratio of 12.5 times.

Analysts suggested higher dividends would also tempt investors back into the market.

“With investors quite keen to persuade company management to return more cash to them, I think dividend growth, in aggregate, could surprise slightly to the upside,” said Ian Williams, strategist at Altium Securities.

The 12-month forward dividend yield for the STOXX Europe 600 index was at 3.3 percent compared to the Dow Jones Industrial average index at 2.7 percent, according to IBES Thomson Reuters Datastream.

($1=.6217 pounds)

(Additional reporting by Simon Jessop; Editing by Greg Mahlich)

European shares flat as SAP gains on Oracle results