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Financials help European shares to hit 2-week high

Published 04/26/2011, 05:28 AM
Updated 04/26/2011, 05:32 AM
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* FTSEurofirst 300 gains 0.2 percent; hits 2-week high

* Financials among top gainers; miners lose ground

* For up-to-the-minute market news, click on

By Atul Prakash

LONDON, April 26 (Reuters) - European shares bounced back to a two-week high after a weaker start on Tuesday, with financials gaining the most and UBS jumping on news money poured back into its core wealth management arm in the first quarter.

However, gains were capped by weaker miners on sharply lower metals prices and some caution before a two-day meeting of the U.S. Federal Reserve, to be followed by a press conference by Fed chairman Ben Bernanke on Wednesday -- the first regularly scheduled briefing by a Fed chief in its 97-year history.

At 0905 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,145.01 points after touching 1,146.37, the highest since April 11. It fell to a low of 1,138.95 earlier in the day, with the market opening after a four-day Easter break.

Financials topped the gainers list, with the STOXX Europe 600 banking index rising 0.5 percent and UBS jumping 5.7 percent. Allied Irish Banks rose 11.6 percent.

Miners, however, slipped, with the STOXX Europe 600 Basic Materials index down 1.1 percent and Antofagasta falling 1.7 percent.

"It's going to be a low volume week because of the holidays and the catalysts for it are on the one side the earnings season in the U.S. and on the other side the conflict in Syria," said Lothar Mentel, chief investment officer at Octopus Investments, which manages 2.5 billion pounds ($4.12 billion).

"The markets are overall generally nervous. I don't think the Fed is going to change its view massively because leading indicators in the U.S. are weak at the moment; company earnings may be strong but the outlook on the leading indicators is starting to turn over."

The Fed is expected to affirm its plan to complete the purchase of $600 billion in U.S. government debt. However, it is likely to discuss how it will eventually exit from its extremely easy monetary policy.

"There are concerns that the Fed's loose monetary policy is going to lead to inflation. Investors are cautious ahead of the meeting and will look for signals related to the central bank's possible moves," said Koen De Leus, strategist at KBC Securities, in Brussels.

TECHNICAL PICTURE

Charts showed that the FTSE Eurofirst 300 index broke down through its long-term uptrend last month. It has struggled to move back up through that key trendline.

"Last week's gain was encouraging, not least because it involved a successful examination of the 200-day moving average, but the fact remains that the index is well below its highs for the year," said Bill McNamara, analyst at Charles Stanley.

"And it really must exceed its recent closing peak at 1,148 to restore confidence."

Telecom shares were also in demand, with the sector index rising 0.3 percent in high volumes.

Among individual movers, Italian rival Parmalat surged 11.6 percent as French dairy group Lactalis launched a 3.375 billion euro ($4.9 billion) takeover bid for the company.

Dutch insurer Aegon rose 3.8 percent on news French reinsurer Scor is to pay $913 million for most of its Transamerica Reinsurance operations to make it the second largest U.S. life reinsurer. (Editing by Hans Peters)

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