European shares buoyed by Chinese optimism

By Joanne Frearson

LONDON, June 14 (Reuters) – Miners helped lift European shares on Tuesday, as investors bought into riskier assets after Chinese data suggested the country would avoid a hard landing.

The Euro STOXX 50 volatility index, one of Europe’s main barometers of market sentiment, fell 4.5 percent, signalling a rise in investor appetite for riskier asset classes.

Investors were encouraged by a flurry of Chinese data that suggested the country’s economic growth was not slowing too quickly, and as China’s central bank raised bank reserve ratios to try and curb inflation.

By 1132 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.7 percent at 1,099.31 points, but the market is down 3.8 percent in June following a slew of weak economic data.

“The market is still recovering from that sell-off and the Chinese data has been a contributing factor to the push higher,” said Ian King, head of international equities at Legal & General, which has 356 billion pounds ($580 billion) under management.

Miners, whose performance is highly correlated to economic growth, featured among the best performers, with the STOXX Europe 600 Basic Resources index rising 0.5 percent.

Technology stocks also advanced. Nokia, up 1.9 percent, was one of the major risers in the sector after Apple agreed to settle a legal dispute with the phone maker over patents, which will help boost its second-quarter earnings.

Banking stocks were also major gainers on the index, with the STOXX Europe 600 Banks index up 1.1 percent.

Banks were still rebounding from Friday, when the sector’s 14-day relative strength index, a momentum indicator, hit “oversold” territory of 30.5. Thirty or below is considered “oversold”.

 

UNCONVINCED

Traders were unconvinced the market could retain these levels, saying 1,100 would act as resistance. They expected the index to drift and find support at 1,065, near its year-low, if the Greek debt situation came back into investors’ minds.

European leaders, who have been in dispute over a second funding deal for Greece, are due to meet in Brussels later on Tuesday to discuss a solution. Credit rating agency Standard & Poor’s cut its rating to the lowest of any country it covers.

“We do not know what is going to happen with Greece. I am half-expecting the market to turn negative,” said David Moss, director of European equities at F&C Asset Management, which has $11.5 billion of assets under management in Europe.

Chartists said the euro zone’s blue chip Euro STOXX 50 index, which was up 1.2 percent at 2,767.85 points, was in a technical rebound after falling 10 percent in the past six weeks, but it was too early to say if this would last.

Paris-based technical analysis firm Day By Day said it sees support at 2,720 points — a low hit in mid-March — 2,688 and 2,640, and resistance at 2,790 points, 2,840 and 2,909.