EUROPE MARKETS: European Stocks Seesaw; Kingfisher Down After Update

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- Ratings downgrades for utility stocks in Europe and for German financial firm Commerzbank AG on Thursday weighed on the region's equity benchmark, which struggled to find a firm direction.

Trading volumes were lighter than usual as markets in Austria, Switzerland, Denmark, Finland, Iceland, Norway and Sweden were closed for the Ascension Day holiday.

The benchmark Stoxx Europe 600 was up less than 1 point at 344.40 as it darted between small gains and losses. The index on Wednesday shed 0.1%, marking its first loss in six sessions.

Shares of Enel SpA and Endesa SpA ranked among the biggest decliners, falling 2% and 2.1%, respectively. Citi downgraded utility Enel to a sell rating, saying the company's equity story, predicated on per-share earnings and dividend per-share growth, will in part be challenged by declining supply margins in Italy and Spain. Spanish utility Endesa's rating was also cut to sell after a strong price-share performance and reduced earnings expectations.

Citi cut Energias de Portugal to sell, prompting its shares to decline 1.7%.

The Stoxx 600's worst price performer on Thursday was Kingfisher PLC as its shares fell 4.6%. The home-improvement retailer's first-quarter trading update showed growth in total sales to 2.8 billion pounds ($4.7 billion), but the company also noted ongoing weak consumer confidence in France, one of its largest markets. Kingfisher's properties include B&Q, Screwfix and Castorama.

Also hit were shares of Commerzbank AG , down 3% after Exane BNP Paribas cut its rating on the financial institution to neutral from outperform. Exane said it upgraded Commerzbank nine months ago as it believed there was a "reasonable chance" that Commerzbank would pass a European Central Bank stress test. "While our view has not changed dramatically, the combination of lower earnings and a more challenging capital path has weakened our conviction," said Exane in a note to clients.

Commerzbank was the biggest decliner on Germany's DAX 30 index , which slipped 0.1% to 9,931.27. The DAX earlier this week reached a record high.

Meanwhile, shares of Roche Holding AG and Novartis AG each gave up 0.3%. Italy's health ministry said it's seeking damages of 1.2 billion euros ($1.6 billion) after Italy's country's antitrust authority ruled that the two Swiss drug makers colluded in preventing the distribution of an eye medication.

Meanwhile, Smith & Nephew PLC returned to the top of the U.K.'s FTSE 100 index as its shares rose 4.6%. The head of Stryker Corp. (SYK) told Fox Business the medical-devices company had been working on a bid for the London-based artificial joints maker.

A potential acquisition of Boston-based quantitative manager Numeric Holdings by Man Group sent shares of the British hedge-fund manager higher by 5.7%, making them the best advancer on the Stoxx 600. A transaction would likely be done by cash only as Man has a large cash balance, and cash transactions are typically "highly accretive," wrote RBC Capital Markets analyst Peter Lenardos in a report. A deal would move Man further away from its AHL hedge fund, and be in line with Man's strategy to buy an asset manager based in the U.S.

"However, given the extremely limited information available, especially on profitability and price, we reserve judgment until more details emerge," said Lenardos.

In other developments, Spain cut its economic-growth forecast for the first quarter to 0.5% from a previous estimate of 0.6%. Spain's IBEX 35 was down 0.3% at 10,722.70.

In France, France's CAC 40 fell 0.1% to 4,525.38.

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