Strong tech shares push European equities to highs

* FTSEurofirst 300 up 0.4 pct; hits two-week highs

* Focus on euro zone debt situation, Portugal

* Tech shares among top gainers on Oracle’s outlook

By Atul Prakash

LONDON, March 25 (Reuters) – European shares climbed to
two-week highs on Friday as stronger tech shares on Oracle’s
upbeat view on spending lent support, though persistent worries
about the euro zone debt situation limited gains.

At 1003 GMT, the FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) index of top
European shares was 0.4 percent higher at 1,127.85 points, the
highest since March 11, when a massive earthquake and tsunami
hit Japan. The index rose 1 percent on Thursday.

Technology shares gained as Oracle (ORCL.O: Quote, Profile, Research) forecast on
Thursday a 4 to 14 percent rise in sales of new software this
quarter, fuelling hopes a global resurgence in technology
spending remains intact. The STOXX Europe 600 Technology index
(.SX8P: Quote, Profile, Research) rose 0.8 percent, while SAP (SAPG.DE: Quote, Profile, Research) rose 2.7 percent.

Experts said equities had potential to gain further in the
long term as fundamentals were improving and shares were better
alternatives. A Reuters poll of about 30 analysts and fund
managers showed that the STOXX Europe 600 (.STOXX: Quote, Profile, Research) is seen
gaining around 11 percent in 2011. [ID:nLDE72M24M]

“European equities as an asset class are relatively
attractive as they combine reasonable valuations, high dividend
yields and healthy balance sheets,” said Hans van de Weg, fund
manger at ING Investment Management.

“Strong liquidity in financial markets in general, combined
with the lack of attractive alternative asset classes are also
positive factors underpinning demand for European equities, said
van de Weg, who manages 750 million euros in European equities.

The market’s recent correction has dragged European stocks’
valuations to three-month lows. The STOXX Europe 600 index
carries a forward price-to-earnings (P/E) ratio of 10.2, a level
not seen since mid-December and well below its 10-year average
of 13.6.

“The underlying picture is very supportive of equities. The
global economy is in a pretty good shape and we have valuations
which are reasonable to low in the equity market. We are bullish
on markets and think that we will make progress from here,” said
Ian Richards, European equity strategist at RBS.

FOCUS ON EURO ZONE DEBT

Financial stocks fell, with the STOXX Europe 600 banking
index (.SX7P: Quote, Profile, Research) down 0.2 percent. Banco de Valencia (BVA.MC: Quote, Profile, Research) fell
1 percent, while Banco Popular (POP.MC: Quote, Profile, Research) dropped 0.6 percent.

Standard & Poor’s downgrade of Portugal’s credit ratings by
two notches to BBB hurt sentiment. The rating agency also warned
it could cut it again as early as next week depending on the
final shape of the euro zone bailout fund. [ID:nLDE72O046]

European leaders agreed on Thursday to raise their financial
rescue fund to the full 440 billion euros ($623 billion) by
June, but avoided discussion of Portugal which is under pressure
to seek a bailout following the resignation of its prime
minister. [ID:nLDE72O009]

“Even though the immediate liquidity issues are being dealt
with, the longer-term solvency issues remain. This means that
the euro zone and its markets are not out of the woods yet,”
said Philippe Gijsels, head of research at BNP Paribas Fortis
Global Markets in Brussels.

“If Portugal ends up in the EFSF, which is not unlikely, it
would help markets as it would contain the liquidity risk,” he
said, referring to the European Financial Stability Facility.

Across Europe, Britain’s FTSE 100 (.FTSE: Quote, Profile, Research), Germany’s DAX
(.GDAXI: Quote, Profile, Research) and France’s CAC 40 (.FCHI: Quote, Profile, Research) were flat to 0.7 percent
higher. Portugal’s PSI 20 (.PSI20: Quote, Profile, Research) was up 0.2 percent.

BP (BP.L: Quote, Profile, Research) fell 0.6 percent after an arbitration panel
thwarted a deal with the British oil major and Rosneft
(ROSN.MM: Quote, Profile, Research), Russia’s largest oil firm. [ID:nLDE72O0EW]
($1=.7062 Euro)
(Additional reporting by Blaise Robinson in Paris; Editing by
Jon Loades-Carter)

Strong tech shares push European equities to highs