European shares rebound, led higher by banks

* FTSEurofirst 300 index up 2 percent at midday

* Beaten-down banks, resource-related shares lead rally

* European stock valuation at 10-month low

* For up-to-the minute market news, click on [STXNEWS/EU]
By Joanne Frearson

LONDON, May 26 (BestGrowthStock) – European shares rebounded on
Wednesday from nine-month lows in the previous session, as
investors went bargain hunting following a sharp six-week
sell-off, with banks among the top risers.

Analysts suggested this was only a technical rebound and
long-term financial problems in the euro zone remained.

By 1002 GMT, the pan-European FTSEurofirst 300 (.FTEU3: )
index of top shares was up 2 percent at 968.51 points.

The index is still down 13 percent since fears over the euro
zone’s sovereign debt problems and new fiscal austerity measures
escalated in mid-April.

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Graph on stock performance in 2010:
http://graphics.thomsonreuters.com/10/GLB_PRFE0510.html
Latest wrapup on the euro zone debt crisis: [ID:nSGE64P04M]
Graphic on the euro zone debt: http://link.reuters.com/fyw72j
Global investing blog http://blogs.reuters.com/globalinvesting/
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The STOXX 600 banking index (.SX7P: ) was up 2.2 percent after
falling 3.7 percent in the previous session. Banco Santander
(SAN.MC: ), HSBC (HSBA.L: ) and Barclays (BARC.L: ) rose 0.9-4.5
percent.

Lloyds Banking Group (LLOY.L: ) and Royal Bank of Scotland
(RBS.L: ) were also given a boost from upgrades by Credit Suisse
and gained 5.7 percent and 4.9 percent respectively.
“We are technically very oversold so we expect to see a
bounce in the market,” said Philippe Gijsels, head of research
at BNP Paribas Fortis Global Markets in Brussels.

“But the longer term picture is still quite challenging and
problems remain. Italy has just made cuts to its budget which
mean the economy will be put under severe pressure for quite
some time.”

Italy joined Europe’s austerity club late Tuesday with 24
billion euros ($29.5 billion) of deficit-reducing cuts that
target public workers and local government. [ID:nLDE64O0R1]

Markets were soothed by news U.S. Treasury Secretary Timothy
Geithner flew to Europe to press for united action to tackle a
deepening debt crisis that has rekindled fears of a return to
recession. [ID:nSGE64P04M]

“Markets need to believe the politicians and central banks
are there to stabilise the situation and take the necessary
steps to get out of this together,” Gijsels said.

ENERGY GAINS

Energy stocks gained as oil edged above $70 a barrel after a
report showed a much larger-than-expected decline in U.S.
gasoline inventories. BG Group (BG.L: ), Royal Dutch Shell
(RDSa.L: ) and Total (TOTF.PA: ) rose 0.7-3.3 percent.

Miners were buoyed as metal prices climbed amid expectations
demand for raw materials from the United States and China this
year will rise.

Anglo American (AAL.L: ), Antofagasta (ANTO.L: ), BHP Billiton
(BLT.L: ), Eurasian Natural Resources Corporation (ENRC.L: ), Rio
Tinto (RIO.L: ) and Xstrata (XTA.L: ) were up 4.3-6.3 percent.

In individual stocks, Portugal Telecom (PTC.LS) jumped 5.6
percent on talk of a possible takeover bid by Spain’s Telefonica
(TEF.MC.: ). [ID:nLDE64P0KP]

Salzgitter (SZGG.DE: ), Germany’s No.2 steel maker, rose 4.7
percent, recovering from Tuesday’s 4.6 percent fall after ING
upgraded the stock to ‘hold’ from ‘sell’.

The recent sharp pullback on European stocks has dragged
European stock valuations to their lowest level in 10 months.
The average price-to-earnings (P/E) ratio of stocks in the STOXX
Europe 600 (.STOXX: ) is 12, compared with a P/E ratio of 15.5 for
Wall Street’s S&P 500 index (.SPX: ).

Across Europe, the FTSE 100 (.FTSE: ) index was up 1.7
percent, Germany’s DAX (.GDAXI: ) was 1.6 percent higher and
France’s CAC 40 (.FCHI: ) rose 2.5 percent.

Investing Research

(Reporting by Joanne Frearson; Editing by Dan Lalor)
($1 = 0.8139 euro)

European shares rebound, led higher by banks