UPDATE 2-European stocks end quiet trading session barely up

  • Reuters
  • Stock Market News
UPDATE 2-European stocks end quiet trading session barely up
Credit: © Reuters.

* Spanish stocks, mostly banks, underperform

* All eyes on ECB, Fed interest rate meetings

* Energy stocks rally on rising oil prices (Updates to close)

By Sruthi Shankar and Medha Singh

July 22 (Reuters) - European shares ended flat on Monday as a summer lull hit trading volumes at the start of a pivotal week that will see the European Central Bank meet over monetary policy and a deluge of corporate earnings reports.

The pan-European STOXX 600 index .STOXX closed up just 0.07%, with just 151.5 million shares changing hands at the close versus its thirty-day average of 1.8 billion.

However, an index of euro zone stocks .STOXXE closed 0.22% higher as Italian shares .FTMIB recovered some ground after political uncertainty drove their worst day in two months on Friday. Investors are gearing up for a showdown between Italy's coalition partners this week that could raise uncertainty about the future of the government. markets have fallen slightly in the past few days, more so in Italy than others, but in most cases they are still close to record highs. They are not particularly well-positioned for a negative event," said Simona Gambarini, a markets economist at Capital Economics in London.

Investors are focussed on the ECB meet on Thursday, with money markets pricing in a more than 50% chance of a 10 basis point cut in interest rates and bond investors expecting at least a clear promise of action in September to counter slowing growth.

That meeting and next week's U.S. Federal Reserve' statement are likely to determine whether a rebound in shares since the worst falls in more than two years in May will continue or stall. main STOXX index hit a session high in afternoon trading following a South China Morning Post report that U.S. trade negotiators could visit China next week for their first face-to-face talks with Chinese officials since the G20 meeting last month. sectors such as technology .SX8P and automakers .SXAP rose, with chipmakers Infineon Technologies IFXGn.DE , Siltronic WAFGn.DE and Dialog Semiconductor DLGS.DE gaining between 2.3% and 4.2%.

Spanish banks were a weak spot ahead of earnings from the euro zone's biggest bank by market value, Banco Santander SAN.MC , on Tuesday. The broader banks index .SX7P was down 0.3%.

Spain's acting Prime Minister Pedro Sanchez signalled on Monday that his Socialist party was close to forming a government with far-left Podemos, which would pave the way for him to be sworn in by parliament. first confirmation vote is scheduled for around 1800 (1600 GMT) on Tuesday, almost three months after an inconclusive national election left the Socialists as the biggest party but short of a majority.

"His alliance with Podemos to form a very leftist government, probably concern a lot of investors, particularly if they're close to market-sensitive ministries such as treasury, finance, labour, housing, etc," a trader in Spain said.

The biggest gainer on the STOXX index was Dutch health technology firm Koninklijke Philips NV PHG.AS , up 5.7%, after reporting better-than-expected quarterly sales growth. shares .SXEP were again among the top gainers, tracking a rise in crude prices due to tensions in the Middle East and propping up London's commodity-heavy blue chip index .FTSE O/R .L

Shares of British fashion retailer TED.L surged 13% to the top of London's FTSE 250 midcap index .FTMC after reports its founder and former chief executive Ray Kelvin would support a private equity buyout months after he quit over allegations of misconduct.

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