European shares hit two-week closing high

By Atul Prakash

LONDON (BestGrowthStock) – European equities hit a two-week closing high on Thursday on reports that the European Central Bank had bought euro zone bonds and as data showed and unexpected surge in U.S. home sales in October.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares finished 1.6 percent stronger at 1,106.18 points, the highest close since November 18. The session witnessed a choppy trade, with the index moving in a broad range of 1,086.95-1,107.25.

The benchmark turned negative after ECB president Jean-Claude Trichet disappointed investors by not announcing an aggressive bond-buying programme, but the market got support after traders said the ECB was buying Portuguese and Irish sovereign bonds at a modestly higher rate than usual.

Bond traders said the buying was in small amounts, though the aggregate was unclear. ECB bond buying has “been bigger than the last couple of weeks, since yesterday. Yesterday and today have definitely been bigger than usual,” one trader said.

Shares in automobile and auto parts featured among the top gainers after data showed U.S. auto sales rose a stronger than expected 17 percent in November. Volkswagen (VOWG_p.DE: ), Porsche (PSHG_p.DE: ) and Renault (RENA.PA: ) rose 3.8 to 5.1 percent.

And analysts stayed positive on the outlook, with a majority of companies beating forecasts in the third-quarter results season.

“We are pretty bullish on the market for the next 12 months, partly on the earnings surprise story … I think that the fears surrounding peripheral debt issues will abate as we go through the course of the next year,” said Graham Bishop, equity strategist at RBS.

Investors heavily sold equities late last week on concerns about the euro zone sovereign debt crisis. An 85 billion-euro ($110.7 billion) EU-IMF rescue of Ireland also failed to dispel fears that Portugal or even Spain might also need help.

“Confidence has finally taken a turn for the good as investors piled back into stocks, buying like they were going out of fashion,” said Angus Campbell, head of sales at Capital Spreads.

“Once again, December is proving to be a bullish month of the calendar year and we could easily see this rally continue as investors top up their portfolios with attractive looking equities ahead of the year end.”

MACROECONOMIC DATA HELPS

Equities also got a boost from U.S. data showing jobless benefits touched a fresh two-year low last week and an unexpected rise in pending sales of previously-owned homes in October.

The VDAX-NEW volatility index (.V1XI: ) showed the appetite for risky assets rose, with the index falling 7 percent. The lower the index, the higher the market’s desire to take risk.

Sharp gains in share prices since Wednesday improved the market’s technical outlook. The Euro STOXX 50 (.STOXX50E: ), the euro zone’s blue-chip index, rose 2 percent to 2,781.39 points.

The index moved back above its 50-day moving average and the 50-percent Fibonacci retracement of a fall from a high in April to a low in May — generally a positive signal. But the index faces strong resistance at 2,806, its 61.8 percent retracement.

Banks were also in demand, with the STOXX Europe 600 banking index (.SX7P: ) rising 2.6 percent. Banco Santander (SAN.MC: ), BBVA (BBVA.MC: ) and Societe Generale (SOGN.PA: ) rose 4.2-5.1 percent.

Dutch mail and logistics firm TNT (TNT.AS: ) jumped 8 percent after detailing the planned separation of its Express activities from its mail activities and said it would keep a 29.9 percent stake in the Express unit.

European shares hit two-week closing high