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 which threaten the global growth outlook, an analyst for Shore Capital says in a note.

The prospect of the U.S. economy running into a "fiscal cliff" - a set of planned tax rises and spending cuts which according could throw the economy back into recession - mean that those sectors which withstand economic downturns seem an attractive option

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

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

Consumer staple producers seem overvalued, but as the global economy slows, relatively resilient earnings should support share prices in that sector, the note adds.

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