Europe shares gain on economic data, bank tests

By Atul Prakash

LONDON (BestGrowthStock) – European shares hit their highest in more than a week on Thursday as encouraging economic numbers tempered concern about the global economic recovery, while banks surged as more details of the sector’s stress tests emerged.

Positive earnings updates from some companies also improved sentiment and appetite for risky assets rose, with the VDAX-NEW volatility index (.V1XI: ) falling to its lowest in more than two weeks. The lower the index, the more the market desire for risk.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares ended 1 percent up at 1,015.56 points, the highest close since late June. It ended higher for a third straight session after falling more than 7 percent in the previous two calendar weeks.

“It was too far too fast on the downside. The market has now priced in the negative news flow and uncertainty,” said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt. “Another trigger is positive expectations for the Q2 figures.”

Danish group A.P. Moller-Maersk (MAERSKb.CO: ) upgraded its earnings guidance for the full year, while Primark owner Associated British Foods (ABF.L: ) said third-quarter sales jumped 13 percent, boosting their shares 3.7 percent and 1.5 percent, respectively.

According to Thomson Reuters data, quarterly earnings of S&P 500 companies are expected to rise 27.1 percent in the second quarter after surging 58.3 percent in the first quarter.

Macro-economic data helped in soothing sentiment, hurt in the past weeks on a series of poor U.S. economic numbers, from housing to jobs.

Figures showed new U.S. claims for unemployment benefits fell more than expected last week to their lowest level in two months, offering cautious hope for the economic recovery that had shown signs of fatigue.

Several top U.S. retail chains reported better-than-expected June same-store sales, while German trade surged in May and industrial output jumped more than expected, fuelling hopes Europe’s largest economy may have posted its strongest growth in over two years in the second quarter.

European Central Bank President Jean-Claude Trichet, however, said the bank expects the euro zone’s economic recovery to be moderate and uneven. The market showed little reaction after the ECB and the Bank of England both held interest rates on hold, as widely expected.

The Euro STOXX 50 (.STOXX50E: ) rose 1.2 percent to 2,666.42 points, hovering near a key resistance level at 2,669.29, the 38.2 percent retracement level of the index’s move to a May low from an April high.

Around Europe, Britain’s FTSE 100 index (.FTSE: ), Germany’s DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) rose 0.7-1.8 percent.

BANKS

Banks were the top gainers, with the STOXX Europe 600 banking index (.SX7P: ) up 1.7 percent. Barclays (BARC.L: ), Lloyds (LLOY.L: ), BNP Paribas (BNPP.PA: ) and Societe Generale (SOGN.PA: ) rose between 3.2 and 4.3 percent.

“With many speculating that there will be no surprisingly bad news from European bank stress tests, investors appear to have got their risk appetite back when it comes to the financial sector and this wave of optimism has helped keep this a broad-based rally,” said Yusuf Heusen, senior trader at IG Index.

The Committee of European Banking Supervisors, conducting the tests, has said 91 banks across Europe were taking part, including many regional banks, seen as the weakest. However, it has yet to release certain key details about the tests.

“When the market has been oversold and you’re faced with an event which you are not sure about, it is wise to buy the market as you could be sitting on a nice profit,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

(Additional reporting by Blaise Robinson in Paris; editing by Simon Jessop)

Europe shares gain on economic data, bank tests