EUROPE MARKETS: Orange, Bouygues Pullbacks Limit European Gains

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- Gains for European stocks were limited Wednesday by sharp losses within the telecommunications industry, as a potential tie-up involving French company Orange SA was shelved.

The Stoxx Europe 600 index was up 0.1% at 345.23. It closed Tuesday's session up 0.9%, the strongest percentage rise in two months, according to FactSet data.

Wading near the bottom of the Stoxx 600 was Orange , with shares dropping 3% after the telecoms company ditched its pursuit of a potential merger or acquisition in France. After examining possibilities that would lead to consolidation in the French telecoms market, Orange said it "believes that it cannot pursue this avenue at the present time as the conditions that the group has set have not been met."

In recent weeks, Orange was reported to be in talks to acquire a stake in Bouygues Telecom , amid a push by the French government for telecom-sector consolidation. Bouygues shares fell 3.3%. Shares of Iliad SA , which had previously put up a bid for the Bouygues unit, were down 5%.

But on the winning end, shares of Alcatel-Lucent were pushed up 4.1% after the telecommunications-equipment maker's rating was raised to overweight from neutral at J.P. Morgan Cazenove. "With the restructuring proceeding at a faster pace than guided originally and the stock having pulled back because some investors have taken profits, not because progress has stalled, we upgrade the stock to overweight," wrote analyst Sandeep Deshpande.

France's CAC 40 equity index was down 0.3% to 4,449.91.

Meanwhile, the U.K.'s FTSE 100 rose 0.2% to 6,816.58 and Germany's DAX 30 gained 0.2% to 9,918.65.

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