Deutsche Telekom, France Telecom downgraded by Morgan Stanley
LONDON (MarketWatch) -- European shares edged higher in a choppy session on Tuesday, with car maker Daimler and retailer Carrefour among notable advancers, as stocks built on the previous session's rally.
The pan-European Dow Jones Stoxx 600 index rose 0.4% to 203.38, shaking off some early weakness and extending Monday's sharp gains.
The Stoxx 600 index is still down roughly 45% in the past twelve months.
"European equities appear cheap on nearly all valuation measures," noted strategists at Deutsche Bank.
In the auto sector, Daimler shares jumped 2.6% after J.P. Morgan started coverage on the German auto maker at overweight.
"Near-term news flow could be negative but the new E-Class arriving in the second quarter of 2009 should provide a boost to earning," the broker said, while noting that the firm also has a strong balance sheet.
The broker started BMW , up 2.3%, Fiat , up 1.2%, Volkswagenpreferred shares and Porsche , up 1%, at neutral and Peugeot , down 1.4%, and Renault , up 1.5%, at underweight.
Meanwhile, Carrefour shares rose 3.7% in Paris and most miners were also performing well, with Lonmin shares up 8.4%.
There was also some positive news on the economic front after the ZEW survey pointed to some recovery in German business sentiment during December. The survey hit 45.2, compared to 53.5 a month ago. Consensus expectations were for a fall to -55.0.
U.S. stock futures also shook off early weakness to trade higher early Tuesday. See Monday's U.S. Market Snapshot.
National indexes mixed
On a national level, the U.K. FTSE 100 index rose 0.7% to 4,331.27 and the French CAC-40 index rose 0.6% to 3,267.11.
The German DAX 30 index stayed in the red, down 0.2% at 4,704.60, with chipmaker Infineon Technologies down 4%.
Late Monday, U.S. competitor Texas Instruments ) drastically slashed its earnings and revenue outlook for the fourth quarter Monday, yet another sign of a slowing market for technology. See full story.
FedEx Corp. also cut its full-year profit outlook late Monday, amid weaker demand for its package-delivery services.
Shares in German rival, Deutsche Post turned higher to trade up 2.3% on Tuesday. The firm said Tuesday that it's sticking to its 2008 outlook.
Morgan Stanley on telecoms
Shares in Deutsche Telekom and France Telecom fell more than 1% each after Morgan Stanley downgraded both firms to underweight from overweight.
On Deutsche Telekom , the broker said that the firm's relative value is no longer so convincing compared to other large-cap telecoms, risks to U.S. growth are on the downside and liabilities are relatively high.
On France Telecom , the broker said that its premium valuation is unwarranted and that the key pillars of its previous overweight call are now fully captured by the market.
Shares in solar energy firm Q-Cells slumped 20.2% after it cut its sales and profit forecast for 2008.
The firm said that, over recent days, uncertainty and weakening market demand arising from the financial crisis have resulted in a number of customers postponing agreed deliveries until next year.
Q-Cells also said that it expects demand to remain weak into early 2009.
