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Easing growth worries give Europe shares a leg-up

Published 10/05/2010, 12:54 PM
Updated 10/05/2010, 12:56 PM
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* FTSEurofirst 300 up 1.4 percent; snaps six-day losing run

* BoJ stimulus pledge spurs expectations others may follow

* U.S. services sector posts bigger-than-expected growth

By Harpreet Bhal

LONDON, Oct 5 (Reuters) - European shares rose on Tuesday as concerns over the pace of recovery eased after data showed a pickup in the U.S. services sector, while a stimulus pledge from the Bank of Japan to spur the economy also reassured investors.

The pan-European FTSEurofirst 300 index closed 1.4 percent higher at 1,065.82 points, snapping six sessions of declines which formed the longest losing run since January 2009.

In a fresh dose of economic stimulus, the Bank of Japan said on Tuesday it will pump more funds into the struggling economy and keep rates virtually at zero.

"The expectation is that the Fed will probably follow suit and the non-farm payrolls (data) ... will be the key indicator as to whether or not the Fed will embark on further asset purchases," said Michael Hewson, market analyst at CMC Markets.

Investors are likely to focus on key economic data including U.S. non-farm payroll numbers on Friday and will monitor interest rate decisions from the Bank of England (BoE) and the European Central Bank (ECB) on Thursday for any indication of further stimulus measures.

On the economic front, the U.S. manufacturing sector accelerated more than forecast last month, according to data from the Institute for Supply, helping support confidence that the pace of recovery there could be picking up.

Economy-sensitive mining stocks were among the heaviest gainers, with Anglo American, Rio Tinto and Xstrata rising between 2.7 and 4.2 percent.

Miners also benefited from a surge in metal and gold prices as the dollar fell across the board on expectations of stimulus measures from major economies.

TRAVEL TAKES HIGH ROAD

Travel companies were led higher by a 4.2 percent gain in TUI Travel after it reported encouraging booking numbers. Rivals FirstGroup and Thomas Cook rose 2.5 and 3.9 percent respectively.

Analysts said the technical picture looked supportive for equities, with the Euro STOXX 50 holding above its 50 percent Fibonacci retracement of its fall from a high in April to a low at March at 2,737.62 points.

The index closed 2.1 percent higher at 2,758.56 points.

"People are looking at the technical indicators and a lot of these models are giving buy signals. Technicals are improving every day," said Lothar Mentel, chief investment officer at Octopus Investments.

German luxury carmaker BMW rose 3.6 percent, with traders citing positive analyst comments, helping the group recoup last week's losses.

Within the sector, Daimler AG, Volkswagen and Renault added 0.5 to 3.6 percent.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 rose 1.4 to 2.3 percent. (Additional reporting by Atul Prakash; Editing by David Hulmes)

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