By Sarah Turner
European shares closed slightly higher on Tuesday, but gains were capped as investors remained wary ahead of a Federal Reserve decision on interest rates. French drinks group Remy Cointreau and Belgian miner Umicore were among the few movers.
The pan-European Dow Jones Stoxx 600 index gained 0.4% at 359.72, with technology and oil stocks among the weaker performers.
Chip maker STMicroelectronics lost 0.7% after U.S. peer Texas Instruments /zigman2/quotes/202237907/composite TXN +1.96% cut forecasts overnight, while oil giants BP and Royal Dutch Shell /zigman2/quotes/206428183/delayed UK:RDSA +1.19% declined about 1% as the light sweet crude price stayed below $62 a barrel.
Semiconductor analysts at J.P. Morgan said Texas Instruments was hit by weakness in high-end wireless demand, while its distributors and some customers reduced inventories.
"On the back of inventory reduction, we continue to expect softer seasonal guidance from companies such as STMicroelectronics," they said.
The French CAC-40 index closed virtually unchanged at 5,426.82 while the German DAX Xetra 30 index gained 0.1% at 6,476.17 and the U.K.'s FTSE 100 index dipped 0.1% at 6,156.40.
Investors were waiting for a decision on interest rates by the Federal Reserve later in the session.
The Fed is widely expected to leave interest rates unchanged, but investors will closely monitor the language of its accompanying statement to see whether central bankers mention any of the weakness seen in recent economic data.
European economic news was also in focus, as the ZEW indicator of German economic sentiment rose to a better-than-expected minus 19 in December, compared with a reading of minus 28.5 in November.
The "German recovery is broadening and business confidence is looking much more solid," noted David Brown, chief economist at Bear Stearns, in a report to clients.
However, U.K. consumer-price data weren't as well received after showing inflation accelerated to 2.7%, the highest level for a decade.
"This raises the risk that the Bank of England will hike rates again in early 2007," said the Bear Stearn's Brown, adding: "A test of $2 is still on the cards for sterling soon." Sterling added 0.1% at $1.9614 to the dollar while the euro lost 0.1% at $1.3238.
Shares in industrial conglomerate Siemens recovered some ground lost earlier in the session to close up 0.3% in Frankfurt, after the company's CEO attempted to allay fears that a probe into alleged bribes could impair its ability to win contracts.
Siemens said late Monday it was restating net income because of the probe. Siemens said additional deferred and current income-tax charges totaled €168 million over about seven years.
Shares in Remy Cointreau, the alcoholic beverage maker famous for its cognac and champagne brands, touched a high not seen for a decade, at 48.70 euros.
Its first-half comparable champagne profit jumped 49% on increased Piper-Heidsieck prices, volumes and improved product and market mix. Cognac operating profit rose 39% because of higher sales of premium versions of Remy Martin cognac.
Remy also detailed the charges for terminating its Maxxium distribution pact, saying it will have to pay €240 million before tax. The company has become a target of bid speculation since withdrawing from the distribution pact. Remy shares closed up 4% at €47.35. (See related article.)
Spanish construction firm Ferrovial lost 1.3% after the U.K. Office of Fair Trading said it intends to refer the supply of services to airports operated by Ferrovial's BAA unit to the Competition Commission for a more detailed investigation.
Also in the travel sector, holiday group operator Club Mediterranee declined 1.9%. It said that by having an "upmarket" strategy it was able to increase revenue despite a disappointing market environment in France and flat demand in Europe.
Fiscal-year net profit rose to €5 million from €3 million, with the group lifting revenue for the first time in four years with 6% growth to €1.68 billion. "The poor earnings outlook and the lack of speculative appeal in the short term support our sell rating," noted analysts at Fortis.
In deal news, shares of Belgium-based Umicore climbed 5.1% after it agreed to combine its zinc smelting assets with Zinifex of Australia in a deal that is expected to create the world's largest zinc maker. (See related article.)
Write to Sarah Turner at firstname.lastname@example.org