By Ishaq Siddiqi and Simon Kennedy
European stock markets pushed marginally higher Monday, as news from retailers and German drug group Bayer helped to offset worries sparked by Standard & Poor's warning of a "selective default" by Greece.
Trading was subdued with the U.S. market closed for the Independence Day holiday. The Stoxx Europe 600 index closed up 0.2% at 275.54.
The market's focus remained on Greece. European efforts to forge a second bailout package for Greece involving private creditors ran into a fresh obstacle as S&P warned that proposals put forward by French banks to roll over some of their Greek debt would likely be considered a default under the rating firm's criteria.
"This is certainly a brave decision by S&P," said Gary Jenkins, head of fixed income research at Evolution Securities.
Bank stocks fell; Credit Agricole and Societe Generale each dropped 1.3% in Paris. The Greek benchmark index edged down 0.2% to 1306.45.
Among major national benchmarks, the U.K.'s FTSE 100 index rose 0.5% to 6017.54,Germany's DAX firmed 0.3% to 7442.96 and France's CAC-40 index slipped 0.1% to 4003.11.
Retailers provided some of the strongest gains after Carrefour's board approved a controversial plan by Brazilian investment firm Gama to combine the French firm's Brazilian assets with those of Companhia Brasileira de Distribuicao Grupo Pao de Acucar.
Carrefour fell 1.7% but rival retailer Casino Guichard-Perrachon increased 1.5%. Casino reminded Carrefour that it "may be held liable" for engaging in a hostile transaction with Casino's Brazilian retail partner.
German chemical and pharmaceutical group Bayer climbed 1.4% after the U.S. Food and Drug Administration late Friday approved an anti-clotting drug the company jointly developed with Johnson & Johnson.
One of the few lenders to buck the downward trend Monday was Italy's Banca Monte dei Paschi diSiena, which surged 5.1% after Societe Generale upgraded the stock to buy from hold, citing its cheap valuation and growth prospects.
MAN dropped 2.1% after Volkswagen said it has increased its stake in the truck maker to about 56%. VW rose 2.1%.
Volkswagen lifted its stake in MAN to more than 30% in May, triggering a mandatory takeover bid under German rules. It offered EUR95 a share, which was below the share price at the time, but a drop in MAN's stock price prompted more shareholders to sell. Shares closed Monday at EUR93.30.
Home-improvement retailer Praktiker slumped 13%, adding to heavy losses on Friday, as investors continued to digest a profit warning. The group said Friday that it now expects adjusted operating profit for the year to fall, having previously expected that earnings would increase.
Shares in utility RWE rose 0.8% on fresh speculation that the German utility is considering to sell its U.K. business, a transaction that could be worth around GBP5 billion, or about $8 billion. RWE declined to comment.
Midcap Stada Arzneimittel rallied 5.3% after J.P. Morgan Cazenove upgraded the generic drug manufacturer to overweight from neutral. The broker said the group's increasing focus outside its home market should help boost growth and that takeover speculation for the stock could reemerge.
On the economic front, investors continued to anticipate that the European Central Bank will raise its key interest rate this week, despite data Monday that showed softer-than-expected euro-zone producer prices.
In Asia, stock markets ended positively with exporters underpinning the Japanese market. Benchmark indexes in Seoul and Sydney tapped multi-week highs.
In the currency market, the euro eased back against the dollar, as new worries about Greece began to surface. By late Europe, the single currency was trading at $1.4512, from $1.4526 late Friday in New York. The yen barely budged.
