EUROPE MARKETS: European Stocks Turn Higher, But Rémy, Diageo Lag

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks settled higher Thursday, with Barclays PLC pacing a rise in banking shares as the firm planned to outline its growth strategy, but shares of Rémy Cointreau SA struggled following the cognac maker's profit warning.

The Stoxx Europe 600 recovered for a gain of 0.5% to 332.43, following an upswing for U.S. stock futures as weekly jobless claims came in ahead of expectations. The index finished the holiday-shortened week with a 1.1% advance.

Bank stocks rose, with Barclays bouncing up 3.8% as the lender, in an internal memo, said it would make changes at its investment bank as it becomes a smaller, more-focused entity to adapt to tougher regulatory and economic conditions. Barclays said in a statement it plans to update the market on May 6.

In the banking group, shares of Deutsche Bank rose 1.6%, Société Générale picked up 1.3% and BNP Paribas gained 0.4%.

"With ambitious targets for cost reduction/control for all the U.K. banks, progress vs. targets is key; we expect this to be a challenge for all the U.K. banks other than Lloyds [Banking Group ]," said J.P. Morgan analysts Chris Manners and Fiona Simpson in a preview this week of first-quarter results for the sector.

The pan-European index also turned higher Thursday after U.S. financial industry heavyweight Goldman Sachs Group Inc. (GS) posted above-anticipated earnings of $4.02 a share and Morgan Stanley's (MS) adjusted earnings of 68 cents a share outstripped expectations of 59 cents a share.

European equity markets had been lower in part as investors kept tabs on developments from diplomatic talks between Ukraine, Russia, the European Union and the U.S. as they discuss Ukraine's growing political crisis and tensions with Russia. On Thursday, three pro-Russian protesters were killed and 13 wounded after a clash with Ukrainian authorities at a military installation in the southeastern city of Mariupol.

Russian President Vladimir Putin ahead of the talks in Geneva accused the Kiev government of committing a "serious crime" for sending troops to eastern Ukraine. The talks were held ahead of a four-day weekend in European markets for Good Friday and for Monday following Easter Sunday.

Among those pacing decliners on the Stoxx 600 were Rémy Cointreau SA and Diageo PLC as the liquor makers posted sales declines. Rémy fell 3.3% after warning that annual operating profit could fall between 35% and 40%. Fourth-quarter sales fell nearly 19%, with contraction in the Rémy Martin brand largely because of "extravagant measures taken by the Chinese government," said Rémy, referring to China's order to officials to cut their lavish spending.

"This austerity policy is not going to decline. On the contrary, the government is stepping [up] its actions in this area," Rémy said during its quarterly conference call.

Shares of Britain's Diageo , whose brands include Smirnoff vodka and Guinness stout, fell 3.7% after the company said its third-quarter sales fell 1.3% on weakness in currencies and in emerging markets.

Also, shares of SAP AG pulled back 1.2% after the company's traditional business with software for installation on computers was hurt by currency impact. Overall profit and sales at SAP in the first quarter, however, rose.

In London, the FTSE 100 picked up 0.6% at 6,625.25 and Germany's DAX 30 rose 1% to 9,409.71. France's CAC 40 gained 0.6% to close at 4,431.8, with a 1.3% increase for shares of Publicis Groupe SA as the advertising and public relations firm logged first-quarter sales growth.

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