Europe Struggles As UBS, Deutsche Bank Jump

European stock markets were largely shifting south, giving up the bulk of earlier gains driven by positive reaction to results from UBS AG, Deutsche Bank AG and BP.

The Stoxx Europe 600 index XX:SXXP +0.07% , set to end the month with a moderate gain of just over 1.5%, erased an opening gain of 0.4% to trade flat at 297.48. The index closed the prior session with a 0.5% gain as investors welcomed a new government in Italy.

Investors were also drawing some cheer from a record close for the Standard & Poor’s 500 index SPX +0.72% . The higher close on Wall Street was driven by upbeat corporate results.

Earnings put banks in a positive spotlight. Shares of UBS UBS +1.45%  CH:UBSN +5.92%  rose 5% after the Swiss investment bank nearly doubled expectations with a profit of 988 million Swiss francs, driven by its wealth management and investment bank units.

Shares of Germany’s Deutsche Bank AGDB +3.74%   DE:DBK +6.91%  rose nearly 6% after reporting results after the close of markets the prior day. The financial institution said its first-quarter profit rose to 1.7 billion euros, or 1.71 euros per share, which exceeded forecasts. The bank also announced capital-raising measures of around 2.8 billion euros.

Analysts at J.P. Morgan Cazenove upgraded the investment bank to overweight from neutral, applauding the fact the bank is “finally starting to address its capital issues.” Nomura analysts lifted Deutsche Bank to neutral from reduce, saying stronger capital will “end recent underperformance”.

Helped by its heavyweight bank, the German DAX 30 index DX:DAX +0.53%   outperformed the rest of Europe with a gain of 0.6% to 7,920.27.

On the downside, shares of Anheuser-Busch Inbev NVBUD +1.43%  fell nearly 3% after the beer group said first-quarter volumes in its key Brazil and U.S. markets fell, as it posted sales that missed expectations.

In London, BP PLC BP +1.02%   UK:BP +3.62%  gained over 3% after the oil major reported a more than three-fold rise in profit for the first quarter, lifted by profits from the sale of its Russian joint venture TNK-BP. But the FTSE 100 indexUK:UKX -0.09%  remained flat at 6,464.39.

The FTSE was held back by a more than 2% drop for Centrica PLC UK:CNA -2.58%  , which was cut to underperform from neutral at Credit Suisse. Shares of Unilever PLCUK:ULVR -1.03%  fell nearly 1%. The group said it will increase its stake in its India unit, Hindustan Unilever, from 52.48% to 75%.

Among other indices, the French CAC 40 index FR:PX1 -0.25%  fell 0.1% to 3,864.31.

The FTSE MIB Italy index XX:FTSEMIB -0.34%  fell 0.6% to 16,823.96, giving back a chunk of the 2.2% it gained the prior session on political optimism. In an interview with Reuters, industry minister Flavio Zanonato said the new government wants to renegotiate its stability pact with the European Union.

New Prime Minister Enrico Letta won a confidence vote a day prior after promising his government will work to change the pace of Europe’s austerity policies, and try to lift his own country out of recession, according to media reports.

MarketWatch