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Econ data, strong earnings boost European shares

Published 08/26/2010, 12:48 PM
Updated 08/26/2010, 12:52 PM
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* FTSEurofirst 300 up 0.9 pct after Wednesday's losses

* Macroeconomic numbers, earnings results support market

* Miners, financials among top gainers

By Atul Prakash

LONDON, Aug 26 (Reuters) - Encouraging company results and soothing economic numbers helped European shares bounce back on Thursday from five-week closing lows a day earlier, though the rally appeared fragile as volumes remained thin.

French bank Credit Agricole rose 2.7 percent on an 89 percent rise in second-quarter net profit, miner Kazakhmys gained 5.2 percent after its underlying first-half earnings per share jumped 130 percent, and French hotel group Accor rose 3.9 percent after doubling core profit.

Sentiment also improved after figures showed new U.S. claims for unemployment benefits fell more than expected last week, and the GfK market research group said German consumer morale was likely to rise in September to its highest level since October 2009. [ID:nN26186848] [ID:nBAF004218]

The FTSEurofirst 300 <.FTEU3> index of top European shares closed 0.9 percent higher at 1,020.27 points after rising as high as 1,023.23 earlier in the day and hitting a five-week closing low in the previous session.

"After recent bad economic numbers and losses in equities, the market was ripe for some stabilisation, and today's U.S. initial jobless claims numbers provided some support," said Tammo Greetfeld, equity strategist at UniCredit.

"But we see further deterioration in the economic outlook and expect to see lower share prices over the next couple of weeks," he added.

Though new U.S. claims for unemployment benefits fell more than expected last week, they remained too high to signal a material shift in a weak labour market that is constraining economic growth. [ID:nN26186848]

Miners were the top performers, helped by a 2.6 percent jump in copper prices and a 1.2 percent rise in aluminium on bargain hunting and a weaker dollar.

The STOXX Europe basic resources index <.SXPP> climbed 2.1 percent, while Anglo American , Antofagasta , Rio Tinto and BHP Billiton rose 2 to 3.5 percent.

Financial stocks were also in demand. The STOXX Europe 600 banking index <.SX7P> was up 1.3 percent, while Standard Chartered , Lloyds and Natixis gained 2.8 to 3 percent.

UPSIDE POTENTIAL

The Euro STOXX 50 <.STOXX50E> rose 0.8 percent to 2,606.89 points. The euro zone's blue-chip index managed to end above 2,585, the 23.6 percent Fibonacci retracement of its fall from an April high to a May low, indicating more upside potential.

The index faces resistance at 2,670 points, its 38.2 percent retracement level and again at its 50-day moving average of 2,691 points.

"We're still yo-yoing in a range in this very technical market where indices move back and forth from support levels to resistance levels," said Jacques Henry, analyst at Louis Capital Markets, in Paris.

German chipmaker Infineon closed 5.2 percent higher to top Frankfurt's large-cap index <.GDAXI> after traders pointed to a report by Bloomberg saying Intel was close to an agreement to buy Infineon's wireless unit. Infineon declined to comment. [ID:nLDE6661CP]

The VDAX-NEW volatility index <.V1XI>, one of Europe's main barometers of investor anxiety, rose 1.6 percent after hitting a seven-week high in the previous session. The higher the index, based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the lower investors' appetite is for risky assets.

"Markets are certainly looking a little less toppy than they have been, and as we move out of the quiet summer period, this could spur another wave of M&A activity," said Ben Critchley, sales trader at IG Index.

"Today may have offered a degree of respite, but to suggest this is any kind of turning point would be a step too far." (Additional reporting by Blaise Robinson in Paris; Editing by Will Waterman)

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