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Portugal aid request lifts European shares

Published 04/07/2011, 04:51 AM
Updated 04/07/2011, 04:56 AM
ES35
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BCP
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* FTSEurofirst 300 index gains 0.2 percent

* Portugal bank stocks rise after Portugal seeks bailout

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

By Joanne Frearson

LONDON, April 7 (Reuters) - European shares rose on Thursday, led higher by financials after Portugal said it would seek financial aid, but traders were wary that the bailout may not signal the end of the euro zone debt crisis.

Portugal is the third euro zone country to seek a bailout, and investors are now watching to see if Spain could be next, though Spanish Economy Minister Elena Salgado told national radio that was not an option.

By 0834 GMT the pan-European FTSEurofirst 300 index of top shares was up 0.2 percent at 1,149.75 points ahead of an interest rate decision by the European Central Bank.

"Portugal was so much expected," said Lothar Mentel, chief investment officer at Octopus Investments, which manages 2.5 billion sterling ($4.1 billion). "Now there is more focus on Spain; the pressure is not really going to go away."

Mentel also said he expected there to be a shift towards value stocks from growth in the next half of the year if the global economy slows.

Banking stocks featured among the best performers, with the STOXX Europe 600 Banks index gaining 1.2 percent.

Portugal's Millennium bcp, Banco Espirito Santo and BPI gained 3.7 to 4.6 percent on the aid request, outperforming Portugal's PSI 20, which was 1 percent higher.

Spain's IBEX 35, however, was down 0.2 percent.

"We've seen some selling in Spanish banks," said a head of sales trading at a European investment bank. "Attention has just switched to the state of the property market in Spain, the amount of writedowns the banks need to take, and that they're not out of the water yet." (Reporting by Joanne Frearson; Editing by Will Waterman) ($1=.6137 Sterling)

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