STOCKS NEWS EUROPE-Shore Capital stay cautious, like defensives

Defensive stocks are a relatively attractive proposition,given uncertainty in the U.S. and rising oil prices whichthreaten the global growth outlook, an analyst for Shore Capitalsays in a note.

The prospect of the U.S. economy running into a "fiscalcliff" - a set of planned tax rises and spending cuts whichaccording could throw the economy back into recession - meanthat those sectors which withstand economic downturns seem anattractive option

"Happily enough most defensive sectors are also relativelyundervalued when viewed from a dividend yield perspective,"Shore Capital says.

For example, food retail has a price to earnings ratio ofonly 80 percent of its historic levels and an attractivedividend yield of 19 percent above its long-run average, whichboth suggest the sector is cheap.

Consumer staple producers seem overvalued, but as the globaleconomy slows, relatively resilient earnings should supportshare prices in that sector, the note adds.

Reuters messagingrm://alistair.smout.thomsonreuters.com@reuters.net


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