STOCKS NEWS EUROPE-JP Morgan stays bullish on UK retail

JP Morgan Cazenove picks Home Retail , Marks & Spencer andDebenhams as three key retail stocks for investors to buy as it seesconsumer indicators stable to positive and the potential for retail activity topick up into 2013.

"Given the improving consumer trends, we could see a decent step up inretail activity come the festive season and into 2013," JP Morgan says in anote.

The investment bank sees Home Retail as a beneficiary from competitorsexiting the market place over Christmas; Marks & Spencer as a stock specificstory where expectations are low and the potential significant with a possibleQ1 catalyst; and Debenhams as likely to benefit from a consumer recovery andleveraging a robust online strategy.

Home Retail, Marks & Spencer and Debenhams rise between 1.9 and 4.2 percent.

Retailers , despite the depressed broader economic environment,have outperformed the FTSE 350 in 2012, adding 11.1 percent comparedwith a 3.8 percent rise by the broader index.

The sector trades on a forward 12-month price-to-earnings of 11.9 times,remaining below its 10-year historical median of 12 times, according to ThomsonReuters data.

JP Morgan says the next catalyst for gains in the sector could well beearnings momentum and it remains confident in its positive view.

Reuters messaging rm://david.brett.thomsonreuters.com@reuters.net