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Europe stocks rebound on data, firm tech shares

Published 03/03/2011, 07:14 AM
Updated 03/03/2011, 07:16 AM
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* FTSEurofirst 300 up 0.9 percent after losses in past 2 days

* Alcatel-Lucent jumps 9.2 percent after bid talk

* Investors watch geopolitical situation, oil prices

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

By Atul Prakash

LONDON, March 3 (Reuters) - European shares bounced back on Thursday after losses in the past two days, with stronger Alcatel-Lucent on a bid talk helping tech shares, while positive U.S. data boosted optimism about global growth.

A drop in crude oil prices, after steep gains in the previous two sessions following conflicts in Libya and tensions in the oil-rich Arab world, was taken positively by equity investors, who trained their sights on macroeconomic indicators.

Figures showed the euro zone's services economy enjoyed its fastest upturn since August 2007 in February. The numbers followed Wednesday's forecast-beating U.S. private sector jobs data and positive comments from the Federal Reserve in its latest Beige Book report.

At 1151 GMT, the FTSEurofirst 300 index of leading European shares was up 0.9 percent at 1,164.29 points, after falling 0.7 percent on Wednesday and 0.6 percent on Tuesday.

"We have seen some very strong swings in recent days. We have seen opposing factors like good economic data versus burden from the oil price. The dominating newsflow in the short term will dictate the direction of the market," said Tammo Greetfeld, equity strategist at UniCredit.

Investors closely watched the geopolitical situation, which injected a lot of volatility in the past days. The struggle between Muammar Gaddafi's Libyan army and rebels intensified and Arab League Secretary-General Amr Moussa said a peace plan from Venezuela's President Hugo Chavez was under consideration.

Subsequent comments from the Arab League head confirmed the plan was under consideration but that no deal had yet been agreed.

Technology shares featured among the top gainers, with the European sector index rising 1.6 percent. Telecom gear giant Ericsson was up 3.4 percent after it picked Leif Johansson as its chairman designate, hoping Volvo's top executive can help it see off growing competition.

Alcatel-Lucent jumped 9.4 percent on talk of a potential bid from a Chinese firm, traders said, also citing talk of positive comment from management on a roadshow in the United States. An Alcatel spokeswoman declined to comment on the rumour.

"We continue to see Alcatel-Lucent as the best positioned of a challenged group of companies in the telecom infrastructure segment and raise our estimates again," Barclays analysts said in a note.

TECHNICAL OUTLOOK

The Euro STOXX 50, the euro zone's blue-chip index, rose 1.4 percent to 2,999.05 points.

"On balance, it's still a positive story. As long as it holds above the recent low at 2,930, I will give it the benefit of doubt that it can recover," said Phil Roberts, chief European technical strategist at Barclays Capital.

"On the topside, you probably need to break 3,040, the high that we saw earlier this week, to signal further gains. Although I don't think that the move will be spectacular."

Roberts saw resistance at 3,040 and further at 3,133 and said that the index was expected to get support at around 2,930.

On the macro front, crude oil prices eased but stayed at a high level, fuelling concern about inflation. The European Central Bank is set to adopt a more hawkish tone at a meeting on Thursday, ahead of an expected interest rate rise later this year.

Oil and equities correlation

http://r.reuters.com/mut38r

Oil and the Vix http://r.reuters.com/dev38r

Oil price shocks http://r.reuters.com/qes28r

Oil price impact on GDP http://r.reuters.com/jux28r

Inflation graphic package http://r.reuters.com/wuz46r

Middle east unrest http://r.reuters.com/nym77r

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Staffing firms also gained. Adecco, the world's biggest temporary work agency, rose 6.3 percent on a strong demand outlook that raised hopes for broader economic growth.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 rose 1.3 to 1.5 percent.

(Graphics by Scott Barber; Editing by Hans Peters)

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