EUROPE MARKETS: Europe Stocks Up On China Optimism; Nokia Rallies

By Sara Sjolin, MarketWatch

LONDON (MarketWatch)--European stock markets moved higher on Wednesday, as China's new leaders implied they would continue their supportive policy stance, while Nokia Corp. shares rallied on China partnership news.

The Stoxx Europe 600 index rose 0.3% to 276.95, on track for a third straight day of gains.

U.S. stocks opened higher on Wall Street.

"We have recently had good news out of China, starting this week with good manufacturing data. But equally you also have to say that there remains major concerns in the market, highlighted by weaker U.S. manufacturing data earlier in the week," said Richard Hunter, head of equities at Hargreaves Lansdown.

Shares of Nokia Corp. (NOK) put in the best performance in the index, up 8.1%, after the Finnish mobile-phone maker said it is launching a new Windows-based Lumia handset in partnership with China's biggest operator, China Mobile Ltd.

Shares of Tesco PLC (TESO) added 2.8%. The British supermarkets retailer said it would review its U.S. Fresh & Easy business and said it is clear it won't "deliver shareholder returns on an appropriate time frame in its current form."

Shares of Assa Abloy AB dropped 0.7%, after J.P. Morgan Cazenove cut the lock manufacturer to neutral from overweight.

Euro-zone data was also in focus, after the region's composite purchasing manager's index rebounded in November from a 40-month low the prior month, but continued to signal a deep contraction in private-sector output.

China in focus

Elsewhere, markets took inspiration from Asia, where most bourses were in positive territory, after comments from a meeting of China's new leadership on Tuesday signaled that an accommodative economy policy would remain in place in coming quarters. Additionally, it stressed it would actively promote urbanization, expected to spur infrastructure investments and support Chine growth.

"It also said it would make economic policies more targeted and effective and fine-tune these policies in an appropriate and timely way, indicating economic reform measures in coming years," analysts at Danske Bank said in a note.

The optimism from Asia, however, wasn't enough to sustain a strong rally, as investors continued to worry about the budget wrangling between Democrats and Republicans in the U.S. The two parties need to reach a deal to avoid a raft of tax hikes and spending cuts slated to come into effect in the new year if no action is taken--commonly referred to as the fiscal cliff.

"Even is the cliff is averted, the deficit still needs to be addressed. We have seen risk-on, risk-off on a daily basis with the underlying sentiment still nervous," said Hunter from Hargreaves Lansdown. "Tax hikes are likely to hit companies. That's a reason they don't want to invest all the cash that is sitting on the sidelines."

"Initially, any sort of resolution will give markets a boost and we can also move higher if we continue to get strong numbers from China. Technically there could be some buying later this month as people begin to think about closing their books for the year-end," he said.

Data from the U.S. showed 118,000 private-sector jobs were added to the economy in November, according to ADP, in line with the MarketWatch compiled estimate.

Separately, the increase in productivity in the U.S. in the third quarter was revised up to 2.9% from an earlier estimate of 1.9%.

Movers

Resource firms, which generally rise on any growth indications from China, were among the biggest gainers in Europe.

Shares of Rio Tinto PLC (RIO) climbed 2.9% in London, while those of BHP Billiton PLC (BHP) added 2.1%. Metals prices were higher across the board.

Banks were also on the rise in the U.K., as Citigroup lifted the European banking sector to overweight.

Standard Chartered PLC picked up 1.3%. Shares of heavyweight HSBC Holdings PLC (HBC) rose 0.6%, as the bank said it's selling its entire stake in Ping An Insurance (Group) Co. of China Ltd. for 72.74 billion Hong Kong dollars ($9.39 billion).

The FTSE 100 index added 0.1% to 5,876.90.

In France, shares of BNP Paribas SA gained 0.2%, after Citigroup added the stock to its Focus List Europe.

Shares of Renault SA climbed 1.1%, while Peugeot SA shares rose 0.5%, as Citigroup also lifted the European auto sector to overweight.

The CAC 40 index gained 0.1% to 3,583.90.

And in Germany, shares of BMW AG rose 0.5%.

 
   The DAX 30 index  traded 0.1% higher at 7,438.15, with shares of Commerzbank AG   up 1.2%. 
 

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