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RPT-European shares rise, boosted by commodities

Published 09/22/2009, 08:24 AM
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(Repeats to remove extraneous text)

* FTSEurofirst 300 ends 2-day losing run, regains 1,000-mark

* Financials, commodity stocks advance

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

By Dominic Lau

LONDON, Sept 22 (Reuters) - European shares rose by midday on Tuesday, as rebounding commodity prices driven by a weaker dollar reversed a two-day losing run.

By 1055 GMT, the FTSEurofirst 300 index of top European shares was up 1.1 percent at 1,010.04 points, regaining the 1,000 mark after falling 0.7 percent the previous session ahead of this week's U.S. Federal Reserve meeting and G20 summit.

"We are in a bull mode but having seen such a large move in recent months, upside is clearly limited with an awful lot of good news priced in. Being cautious would be the most prudent (strategy) in the days ahead," said Jawaid Afsar, a dealer at Securequity.

Oil producers were among the top gainers as crude rose in a technical rebound after a 3.2 percent fall in the previous session and on a weaker dollar.

BP, Royal Dutch Shell, Total and StatoilHydro added 1.2-2.5 percent.

Also in the resources sector, metal prices bounced, aiding mining shares. BHP Billiton, Rio Tinto, Eurasian Natural Resources, Fresnillo and Anglo American put on 2.5-5.8 percent.

The VDAX-NEW volatility index fell 3.8 percent on Tuesday. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher investors' appetite for risky assets such as stocks.

Banks were in favour, with risk appetite improving from the previous session. The banking sector has rallied nearly 172 percent since early March.

Credit Suisse, Credit Agricole, Deutsche Bank, KBC Groep, UBS and Banco Santander advanced 1.3-3.3 percent. The European index has rallied more than 56 percent since hitting a low in March and is up nearly 19 percent this quarter, on track to post its best quarterly rise in almost a decade.

"After a 55-60 percent run(-up) in equity markets since early March, investors have come to the view that share prices are somewhat overvalued," said Jeremy Batstone-Carr, head of private client research at Charles Stanley in London.

"We are not convinced by the capacity of the economy to grow strongly ... Indeed, there remains a strong risk of a double dip recession either in 2010 or 2011 once the policy stimulus -- fiscal and monetary -- wears off."

Drugmakers, which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand. Shire, AstraZeneca, Novartis and Roche rose 0.8-2.3 percent.

Across Europe, Britain's FTSE 100 advanced 1 percent, Germany's DAX rose 1.4 percent and France's CAC 40 put on 1 percent.

FED, G20

The policy-setting U.S. Federal Open Market Committee's decision on interest rates is expected on Wednesday. Economists expect the FOMC to hold the target range for overnight interest rates steady at zero to 0.25 percent.

With steering the global economy out of recession the key focus for the Group of 20 leaders meeting in Pittsburgh on Thursday and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.

"The issue of "exit strategies" is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.

Among other individual movers, HeidelbergCement surged 3.8 percent. The company priced shares to be issued in its planned capital increase at 37 euros each, the upper range of its offer price.

Marks & Spencer rose 2.8 percent after Banc of America-Merrill Lynch raised its price target on the UK retailer to by 9.8 percent and kept its "buy" rating.

The same broker also added cruise operator Carnival to its "Europe 1" list. The stock was up 4.1 percent.

Shares in Lagardere, the world's biggest publisher of consumer magazines, surged 4.4 percent after French business weekly La Lettre de L'Expansion reported that Lagardere Active, a division of the company, was examining options for its U.S. magazine unit, Hachette Filipacchi Media US.

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