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European shares up on hopes of more U.S. stimulus

Published 07/13/2011, 10:55 AM
Updated 07/13/2011, 11:00 AM
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* FTSEurofirst 300 turns positive; up 0.7 pct

* Shares gain on Bernanke's comments

* Auto shares among top gainers

By Atul Prakash

LONDON, July 13 (Reuters) - European shares turned positive in afternoon trade on Wednesday after U.S. Federal Reserve Chairman Ben Bernanke said the central bank is ready to ease monetary policy further if the economy weakens and inflation moves lower.

At 1443 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 1,099.31 points after falling to a low of 1,087.95 earlier in the session.

Analysts, however, advised caution.

"I wouldn't conclude just yet that the QE3 is coming and therefore everything is ok, like we were last year. It's going to take a while to sell the idea of QE3 to Congress," said Graham Bishop, equity strategist at RBS, referring to quantitative easing.

Bernanke said in prepared testimony before the U.S. House of Representatives Financial Services Committee that the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support.

Automobile shares featured among the top gainers on expectations that global demand for vehicle will gradually pick up. Traders said a positive Morgan Stanley note on the sector as another factor driving share prices. The auto sector index rose 2.6 percent. (Reporting by Atul Prakash; Editing by Elaine Hardcastle)

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