DJ MARKET COMMENT European Shares Up On Commodities

European shares pulled back Thursday from lows last seen in March, turning modestly higher as investors attempted to compensate for higher inflation by buying up commodity-sector shares.

"We suspect that it is still too early to call the top in the commodity bull run," said Citigroup portfolio strategists, noting that commodity-sector stocks are obvious hedges for investors worried about inflation.

In particular, strong gains from oil companies helped European shares advance.

The pan-European Dow Jones Stoxx 600 index added 0.2% at 302.29, after hitting a low of 299.76 early in the session, a level not seen since March 25.

The French CAC-40 index rose 0.1% to 4,625.35, while the German DAX 30 index edged down 0.2%. The U.K.'s FTSE 100 index advanced 0.3% to 5,771.60 after some much stronger-than-expected retail sales figures.

U.S. stock futures were pointing to a mixed start on Thursday.

Among energy companies' shares on the rise, BP (BP) added 1.7% and BG Group moved up 2.4% in London, with Total (TOT) gaining 2.7% in Paris.

Total was upgraded to buy from neutral by Goldman Sachs, which also lifted its estimates for Brent crude-oil prices to 2012.

"We have increased our oil-price forecasts to reflect a continued tightening" of supply-demand fundamentals globally for crude, the broker said.

Light sweet crude prices trended modestly lower in electronic trading, changing hands at $136.59 a barrel, off 58 cents.

At the same time, Goldman downgraded Italy's ENI to neutral from buy, saying that there are better growth opportunities to be had in Total over the next two years. ENI's shares rose 1.1%.

Karen Olney, European equity strategist at Merrill Lynch, also remains bullish on the sector. "Fundamentals absolutely support oils over banks. The sector has the strongest earnings momentum in Europe and is also among the cheapest," she wrote in a recent note.

As they are also usually considered an inflation hedge for equity investors, utilities were doing well. Shares of E.On rose 1.2%, while EdF climbed 2.3%.

Autos, banks down

Also Thursday, crude prices were having their usual negative effect on automakers and airlines. Shares of Renault traded down 2.2%, with Ryanair Holdings (RYAAY) slipping 2.5%.

Adding to the negative pressure, shares of Airbus parent EADS dropped 1.2%. Investors reacted to a surprise U.S. ruling that could give rival Boeing Co. (BA) another shot at a $40 billion military tanker deal awarded to an EADS consortium earlier in the year.

Banks also weighed as investors continue to worry about what the impact of slowing economic growth would be on profits.

Shares of UBS (UBS) fell 1.5%. Credit Suisse cut its rating on the lender to neutral from outperform, saying that, although it estimates that UBS will have to take another 2.5 billion Swiss franc ($2.4 billion) write-down in the current quarter, the main change in its view stems from the belief that UBS's private-bank operations now aren't expected to recover quickly.

And in London, shares of HBOS fell 4.5%.

The U.K.'s biggest mortgage lender outlined a gloomy picture for the housing market, saying it expects prices to fall 9% this year and transaction levels to almost halve, though the bank added its overall performance is in line with expectations.

http://wiadomosci.onet.pl/1772534,10,dj_market_comment_european_shares_up_on

Business Financial Services

DJ MARKET COMMENT European Shares Up On Commodities