Europe stocks close near breakeven
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LONDON, England (Reuters) -- European shares closed near breakeve Thursday, retreating from fresh 16-month peaks as weakness in retailers and a soft start on Wall Street outweighed a rally in insurers like Dutch firm Aegon.
Stronger-than-expected earnings and a steady outlook from U.S. computer giant IBM didn't stop the U.S. tech-laden Nasdaq Composite sinking as investors looked instead to a disappointing outlook from chip giant Intel.
British conglomerate GUS drove the retail sector down, falling 5.1 percent after its Argos retail chain reported a sharp slowdown in growth over Christmas, while rival Woolworths shed 5.8 percent after its Christmas sales also disappointed.
The FTSE Eurotop 300 index of pan-European blue chips closed flat at 979.84 points, having hit an intra-day peak of 982.84 -- its highest level since August 2002.
Volume was a heavy 3.7 billion euros, with advancing stocks and decliners evenly matched.
The narrower DJ Euro Stoxx 50 index ended 0.4 percent higher at 2,839.6 points.
"We are still positive on equity markets," said Alla Goudzinskaya, equity strategist at ABN AMRO. "But returns will become much more modest, and people will become more discerning...looking more for value."
In the U.S., jobless claims fell more than expected last week, while the New York's Federal Reserve Empire State index of business conditions hit a record high in January.
U.S. retail sales in December came in slightly weaker than expected, but consumer inflation was in line with expectations.
"Overall, it continued the positive newsflow from the U.S., and inflation remains in check," said James Knightley, an economist at ING.
"Although activity is improving, there's no pressure for an upward move in interest rates from the Fed yet. They can wait until there are clear and definite signs that employment is picking up and we are of the view that the first hike won't come until the third quarter."
Corporate profits should continue to grow, benefiting from improving demand and ongoing controls on costs, he said.
Insurers in favor
Around Europe, London's FTSE 100 closed 0.1 percent lower, and Paris's CAC-40 ended up 0.4 percent. Zurich's SMI rose 0.1 percent, Frankfurt's DAX closed 0.3 percent firmer, while heavyweight financial and insurance stocks lifted Amsterdam's AEX an impressive 1.2 percent to a 13-month closing high.
The DJ Stoxx insurance sector was Europe's strongest industry group, up 2.2 percent as insurers dominated the blue-chip advancers' column amid several broker upgrades.
Dutch firm ING rallied 2.8 percent as UBS upgraded it to a "buy," while French peer Axa rose 3.4 percent after the same broker raised it to a "neutral" from "reduce."
Britain's Aviva rose 2.4 percent after Dresdner bank raised its stance on UK life assurers to "overweight," citing improving consumer sentiment and benign capital market conditions. Dutch insurer Aegon, which completed a $5.4 billion sale of a unit on Wednesday, was up 3.2 percent.
Elsewhere in the financial sector, talk of consolidation among German banks picked up again on news that U.S. bank J.P. Morgan had agreed to buy Chicago-based Bank One.
HVB rose 4.4 percent, Commerzbank was up 3.9 percent, and Deutsche Bank was up 1.4 percent.
Other notable gainers included global news and information firm Reuters, which gained 13.9 percent to an 18-month high after the group said the worst of a two-year revenue slide was over.
European chip shares fell as Intel reported a doubling of quarterly profit and its highest-ever quarterly revenue after Wednesday's close, but also forecast a drop in revenues in the first quarter.
German chipmaker Infineon eased 1.6 percent, while Dutch chip equipment maker ASML fell 3.4 percent.
ASML's fall came despite the group soundly beating expectations with a strong return to profit at 16 million euros in the fourth quarter, but there was some investor disappointment at the level of new orders.
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