EUROPE MARKETS: Europe Stocks Rise After PMI, Broker Upgrades

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets extended gains into a sixth straight session on Monday, with several firms on the rise after broker upgrades and investors welcoming a rise in euro-zone PMI data.

The Stoxx Europe 600 index added 0.3% to 304.96, on track for the highest close since late May.

Some of the biggest gains in the pan-European index came on the back of broker upgrades. Shares of Mediaset SpA climbed 3.6% after Deutsche Bank lifted the Italian broadcaster to buy from hold.

Shares of Thomas Cook Group PLC added 5.3% after Citigroup lifted the travel agency to buy from neutral, while Drax Group PLC rose 3.4% as Goldman Sachs lifted the utility firm to buy and added it to the conviction list.

On a more downbeat note, share of Akzo Nobel NV (AKZOY) dropped 1.3% after Berenberg cut the paints and coatings firm to sell from hold.

Also on the decline in Europe, shares of heavyweight bank HSBC (HBC) dropped 4.9% after the bank reported a 23% rise in first-half net profit, but fell short of analyst expectations. Meanwhile, revenue fell 7%.

More broadly, investors digested the region's final purchasing managers' indexes for July, released Monday. The composite index for the euro zone rose to 50.5, above a preliminary reading of 50.4 and better than June's 48.7. The July reading marked the first time since January 2012 the index has climbed above the 50 level that separates expansion from contraction.

PMI data were also in the spotlight in the U.K., where the Markit/CIPS headline business-activity index rose to an over-six-and-a-half-year high of 60.2 in July, up from 56.9 in June and beating expectations of a 56 reading.

The reading, however, wasn't enough to send the FTSE 100 index into positive territory, as the HSBC shares added pressure. The index traded 0.1% lower at 6,641.43.

On the rise in London, shares of Lloyds Banking Group PLC (LYG) climbed 4.1% after the Financial Times reported that the bank aims to start paying out up to 70% of its earnings in dividends by about 2015. A representative from Lloyds was not immediately available to comment.

Elsewhere in Europe, Germany's DAX 30 index slipped 0.1% to 8,401.81, while France's CAC 40 index traded 0.2% higher at 4,052.34.

Shares of Veolia Environnement SA rallied 4.4% in Paris, after the waste and water firm said adjusted operating profit rose 28% in the first half to 539 million euros ($716 million).

Investors were further mulling over last week's U.S. jobs report to try to decipher whether it strengthens or weakens the case for the Federal Reserve to reduce its asset purchases in coming months. The Labor Department said 162,000 jobs were created in July, below analyst expectations, while the unemployment rate fell to 7.4%, marking the lowest level since the end of 2008.

U.S. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data.

U.S. stock futures pointed to an almost flat open on Wall Street.

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