BP and euro debt auctions lift European shares

By Dominic Lau

LONDON (BestGrowthStock) – European shares rose for a third day on Friday as BP rebounded on supportive UK government comments, and sentiment was boosted by strong demand for bond sales in peripheral euro zone countries. Index heavyweight BP recovered 8.4 percent after hitting a 13-year low on Thursday, as investors welcomed support from British politicians for the oil major and pointed to hopes its dividend might be deferred rather than cut.

The stock is still down nearly 40 percent since April when the oil spill in the Gulf of Mexico began.

Other oil majors also gained, with Royal Dutch Shell up 1.5 percent and Total up 0.4 percent.

By 1035 GMT, the FTSEurofirst 300 index of leading European shares was up 0.8 percent at 1,022.33 points, hitting a one-week high. The index is up 2.4 percent this week but is still down 8 percent since hitting a peak in mid-April.

After Belgium, Portugal and Spain found good demand for their bonds this week, Italy carried out a successful sale, easing immediate concerns about funding problems on the euro zone periphery and boosting appetite for the euro, banking shares and battered Spanish stocks in particular.

BNP Paribas, Deutsche Bank, Banco Santander and BBVA rose 1.4 to 8.1 percent.

The banking sector has been one of the worst performers in Europe. Its one-year forward price relative to earnings stood at 8, compared with its five-year average of 10, according to Thomson Reuters DataStream.

Neil Dwane, chief investment officer at Allianz’s RCM, however, expected the equities market to be rangebound for some time.

“People who haven’t bought the market yet probably don’t feel it had enough of a setback to want to pile in, and people who have got the market probably feel that they missed the opportunity to sell it slightly higher in the beginning of this year and are maybe waiting for a rally,” he said.

Across Europe, Britain’s FTSE 100 put on 0.8 percent, Germany’s DAX rose 0.1 percent, France’s CAC 40 gained 0.9 percent and Spain’s Ibex 35 surged 4.3 percent.

The Thomson Reuters Peripheral Eurozone Countries Index, comprising Ireland, Italy, Spain, Portugal and Greece, added 2.6 percent.

NOVARTIS HIGHER

Drugmakers featured among the top performers. Novartis put on 3.3 percent after its multiple sclerosis pill Gilenia won strong backing from a U.S. advisory panel.

However, other defensive sectors, such as beverage and food producers, fell on stronger investors’ risk appetite.

Europe’s food & beverage producers carried a one-year forward P/E of 14.2, below its five-year average of 15.34, according to DataStream.

Credit Suisse said in a note that pharmaceuticals and telecoms were among the most attractively valued of defensive stocks when comparing market implied profitability relative to historical norm. Among telecoms, it liked Telecom Italia and Vodafone.

It also recommended consumer staples with high emerging market exposure and utilities with a guaranteed real rate of return.

Stock Market Trading

(Editing by Will Waterman)

BP and euro debt auctions lift European shares