European stocks flat; Glencore, Xstrata rally

An earlier version of this story misstated the U.S. jobless claims data. The story has been corrected.

LONDON (MarketWatch) � European stock markets edged higher Thursday, supported by strong U.S. macroeconomic data and a mining-sector rally after Xstrata PLC confirmed it�s in merger talks with Glencore International PLC.

Shares of Xstrata UK:XTA �surged 9.9% and those of Glencore UK:GLEN rallied 6.9%. News of the merger talks between the two commodities firms pushed the mining sector higher. Vedanta Resources PLC UK:VED �gained 5.8%, Rio Tinto PLC UK:RIO �advanced 1.8%, and Randgold Resources Ltd. UK:RRS �climbed 1.6%.

The pan-European Stoxx 600 index XX:SXXP �closed 0.2% higher to 260.11, holding on to a six-month high.

France�s CAC 40 index FR:PX1 �increased 0.3% to 3,376.66, while Germany�s DAX 30 index DX:DAX �rose 0.6% to 6,655.63.

Shares of Deutsche Bank AG DB DE:DBK �fell 0.4% in Frankfurt. The German bank reported a 76% decline in fourth-quarter profit, citing �continued market uncertainty and a lack of risk appetite leading to subdued market activity.�

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Stock markets spiked after data from the U.S. showed productivity inched 0.7% higher in the fourth quarter of 2011 and initial jobless claims fell by 12,000 in the week ended Jan. 28 to a seasonally adjusted 367,000. Economists surveyed by MarketWatch had expected productivity to rise 0.6% and jobless claims to fall to 370,000.

�Markets are reacting to more positive economic numbers, but I remain concerned about where we�re heading. We have to be careful about reacting to the good news, as there is still a lot of risk out there,� said Peter Dixon, an analyst at Commerzbank AG.

Investors also digested news that the Spanish Treasury sold nearly 4.6 billion euros ($6.1 billion) of government debt and saw its borrowing costs decline. France was also active in the bond markets, selling �7.96 billion of government debt.

Elsewhere, investors continued to await the final conclusion in the negotiations between Greece and its private creditors to write down debt. Negotiators representing bond holders said late Wednesday that the talks progressed and would be completed in days.

The Athens General Index GR:GD �fell 0.5% to 792.44.

Also concerned about European debt, Chinese Premier Wen Jiabao said Thursday that China is considering how to get more involved in resolving Europe�s debt crisis through the European rescue funds.

In London, the FTSE 100 index UK:UKX �nudged 0.1% higher to 5,796.07, after several heavyweight companies reported earnings.

Unilever PLC UK:ULVR �dropped 4.4% after posting a small rise in profit, but giving a cautious outlook for 2012.

Shares of AstraZeneca PLC UK:AZN �shed 3.4% as the drug maker saw lower profit in the fourth quarter and said it would cut approximately 7,300 jobs, while oil major Royal Dutch Shell PLC UK:RDSB �fell 1.2% after its earnings missed analyst expectations.

�Earnings haven�t been great. The fourth quarter was quite soft in activity, but it will prove to be an outlier. I don�t expect a massive weakening in corporate numbers through 2012,� Dixon said.

Several oil companies weighed on European stock markets, with BP PLC UK:BP �BP �shedding 1.1%, Cairn Energy PLC UK:CNE �dropping 1.7% and A.P. Moeller-Maersk A/S DK:MAERSKB � shedding 1.1%. Oil futures for March delivery �fell 1.7% at $95.99 a barrel in late European trade.

Norwegian oil giant Norsk Hydro ASA NO:NHY �fell 0.5% after Citigroup downgraded the stock to sell, based on demand weakness in its downstream operations and production curtailments.

�There�s a lot of concern about when oil prices will go up. There might be less demand because of a possible slowdown in Asia and there are concerns about Iran and what it will mean for demand in Europe,� Dixon said.

Also in Oslo, Telenor ASA NO:TEL �dropped 4.4% on news that the Indian Supreme Court Thursday canceled all cellular-telecom-service licenses issued without auction after January 2008. Telenor had invested $2.1 billion in its Indian partner Uninor, which stands to lose 22 licences, according to media reports.

Further among decliners, Belgian steel cord manufacturer Bekaert S.A. N.V. BE:BEKB �sank 11.6% after announcing it would lay off 600 employees to reduce global production costs.