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Europe shares hit 3-wk high; US payrolls awaited

Published 09/03/2010, 07:47 AM
Updated 09/03/2010, 07:52 AM

* FTSEurofirst 300 index gains 0.4 percent

* Technology shares gain; Autonomy rises

* Banks up ahead of U.S. non-farm payrolls

By Joanne Frearson

LONDON, Sept 3 (Reuters) - European shares rose on Friday and touched a three-week high ahead of U.S. non-farm payroll data as investors hope the global recovery is still intact, with technology stocks boosted by takeover talk.

Technology stocks featured among the top movers, with the STOXX Europe 600 Technology <.SX8P index up 0.8 percent.

Autonomy extended gains from Thursday and rose 3.3 percent. M&A speculation that the software company could find itself at the centre of a takeover battle between Microsoft and Oracle, boosted the stock on Thursday.

By 1103 GMT, the pan-European FTSEurofirst 300 index of top shares was 0.4 percent higher at 1,059.55 points after being up as much as 1,060.38 earlier - its highest since Aug. 11.

However, volumes on the index were thin at just 17.8 percent of its 90 day average.

"All eyes are on U.S. non-farm payrolls. The resilience we have seen in the equity markets this past week is a positive sign that maybe investors are hopeful of a decent number today, but volumes are low," said Joshua Raymond, market strategist at City Index.

"Considering the comments that we have had from Federal Reserve Chairman Ben Bernanke and how bad the economic data has been, expectations are fairly low already for non-farm payrolls, which means if we get an in-line figure it may be seen as a positive."

The non-farm payrolls, due at 1230 GMT, most likely fell for a third straight month in August as more temporary census jobs ended and cautious businesses scaled back hiring, an outcome that could put pressure on the Federal Reserve to prop up growth.

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For a graphic on non-farm payrolls, click:

http://graphics.thomsonreuters.com/F/09/US_NFPP0910.gif

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Worries over the state of the global recovery have been somewhat eased this week on surprisingly strong manufacturing data from the United States and China, while economic figures from Australia also improved confidence.

Valuations on the STOXX Europe 600 looked cheap. Its one-year forward price-to-earnings stood at about 9.96 against a 10-year average of 13.68, Thomson Reuters Datastream showed.

BANKS IN DEMAND

Banks, which tend to perform better in a stronger economic environment, were in demand ahead of the non-farm payroll data. According to StarMine data, the banking sector has one of the highest 12-month forward earnings growth rates at 68.2 percent, compared with the STOXX 600 average of 23.5 percent.

Barclays, Credit Suisse and Societe Generale rose 1.8 to 1.9 percent higher.

Aggreko, the world's largest provider of temporary power, climbed 4.9 percent, with traders citing talk on FT Alphaville that it may be the subject of bid interest from Swiss engineering group ABB. Aggreko declined to comment.

The Euro STOXX 50 rose 0.6 percent to 2,732.18 points, through a key resistance level of 2,718 points, the 50 percent Fibonacci retracement from the July 20 to Aug. 5 rally.

The index's next resistance level is at 2,737 points, the 50 percent Fibonacci retracement of its fall from an April high to a May low.

However, not all analysts were bullish about the market. UBS cut its year-end target for the FTSEurofirst 300 index to 1,150 points from 1,250, citing the uncertain economic outlook and fears of a double-dip recession.

"If it becomes clear that a double dip will be avoided (our central scenario), then the potential upside is significantly higher," UBS strategists said.

Across Europe, the FTSE 100 index was up 0.5 percent, Germany's DAX was 0.4 percent higher and France's CAC 40 gained 0.7 percent. (Reporting by Joanne Frearson; Editing by Sharon Lindores)

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