STOCKS NEWS EUROPE-LSE in JPM rating boost, Deutsche Boerse lags

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Shares in the London Stock Exchange (Other OTC: LDNXF - news) rise 1.2 percent to top the STOXX Europe 600 Financial Services index after JPMorgan upgrades the stock to "neutral" from "underweight", expecting the exchange operator to thrive in the current regulatory and market environment, traders say.

The bank expects LSE to benefit from new rules on the clearing of over the counter (OTC (Brussels: OTCB.BR - news) ) trades and an increase in initial public offerings (IPO).

"We believe (LSE) is well positioned to benefit from growth in OTC clearing, that the uncertainty relating to larger members has waned, and that further cost cutting opportunities remain," the bank's analysts write in a note.

"We continue to expect growth from the FTSE unit, and believe the robust IPO calendar provides a healthy backdrop for Capital Markets."

The analysts say the LSE's premium to German rival Deutsche Boerse (Xetra: 63DA.DE - news) is justified, although they see little upside for LSE at current valuations.

LSE's shares, which rallied 25 percent over the past six months, trade at 17.8 times their expected earnings for the next 12 months, close to their highest levels in six years and a 25 premium to Deutsche Boerse, the largest since 2006, Datastream data shows.

JPMorgan downgrades Deutsche Boerse to "underweight" from "neutral", citing a challenging outlook, helping send the stock down 0.2 percent.

"With an extensive cost-cutting program having already been implemented, we see little reason to expect material EPS (earnings per share) growth in the coming years, and remain below consensus with our estimates," the analysts say.

To see a graphic on LSE's and Deutsche Bank (Xetra: DBK.DE - news) 's relative performance and valuation, please click http://link.reuters.com/qym77v

Reuters messaging rm://maria.sheahan.thomsonreuters.com@reuters.net

francesco.canepa.thomsonreuters.com@reuters.net