EUROPE MARKETS: Europe Stocks Rise As HSBC, PMI Support Sentiment

By Sara Sjolin and Barbara Kollmeyer, MarketWatch

LONDON (MarketWatch) -- European stock markets moved higher on Monday, lifted by HSBC Holdings PLC after the heavyweight bank posted results, while the broader market welcomed encouraging data on euro-zone factory activity.

Airline and travel stocks were among the biggest losers, after Ryanair Holdings PLC cut its outlook and warned of falling fares.

The Stoxx Europe 600 index rose 0.3% to close at 322.50, extending gains seen last week, when the benchmark scored its fourth weekly advance in a row.

U.S. stocks traded mostly higher on Wall Street.

"If you look at momentum indicators, they are starting to look a bit overbought and the upside potential is beginning to become limited. Markets have been pushing consistently higher and at some stage we'll see a correction or at least a consolidation," said Richard Perry, chief market strategist at Central Markets in London. "But it'll just be a near-term correction and markets should push higher into the new year, with the Fed looking unlikely to taper until next year," he added.

Banks helped support the main Europe index, with HSBC (HBC) up 2.3% after posting a 28% rise in third-quarter profit. The gain helped lift the U.K.'s FTSE 100 index 0.4% to 6,763.62.

Shares of Ryanair led the decliners list, tumbling 13% after the Irish-based budget airline cut its full-year guidance due to a dip in average fares. Ryanair said it expects fares to fall by a further 9% in the third quarter and by up to 10% in the fourth quarter.

The news rippled through the sector, with EasyJet PLC losing 5.1%, Thomas Cook Group PLC down 3.5% and Air France-KLM SA dropping 1.6%.

Shares of Weir Group PLC fell 3.7% after the engineering company cut its 2013 revenue expectations due to further project-delivery delays and industrial unrest in South Africa.

Euro-zone and China PMI

More broadly, investors welcomed data that showed euro-zone factory activity edged higher in October, thanks to modest strength in Germany and other northern economies. The Markit manufacturing purchasing managers' index for the currency bloc rose to 51.3 from 51.1 in September, above the 50 threshold that separates expansion from contraction. The reading was unchanged from an earlier estimate.

"More encouraging indications about the recovery can be gained by looking at the increasingly broad-based nature of the upturn, and especially the fact that increasingly robust gains in production are now being seen in countries such as Spain, Italy and Ireland, to suggest that structural reforms to boost competitiveness are starting to pay off," said Chris Williamson, chief economist at Markit.

PMIs were also in the spotlight in China, where the country's official non-manufacturing purchasing managers' index rose to 56.3 in October, marking a 14-month high.

Some miners pushed higher after the data, as China is a big user of natural resources. Shares of Rio Tinto PLC (RIO) rose 3.3%, and shares of BHP Billiton PLC (BHP) gained 1.6%. Metals prices were mostly higher.

Among other notable movers, shares of PostNL NV jumped 7.8% after the Dutch mail firm lifted its full-year outlook.

Shares of K+S AG rallied 9.3% after HSBC lifted the potash maker to neutral from underweight and Commerzbank raised its rating to hold from reduce.

Fuchs Petrolub SE jumped 5.8% after the lubricant manufacturer confirmed its full-year outlook and said earnings before interest and taxes climbed 5.8% in the third quarter.

Credit Suisse Group AG (CS) slumped 6.7% and UBS AG (UBS) slid 5.3% on fears Swiss law makers will push ahead and impose stricter rules on the banks to curb borrowing, which would force the institutions to hold more capital than international rivals.

The German DAX 30 index rose 0.3% to 9,037.23, while the French CAC 40 index added 0.4% to 4,288.59.

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