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Europe stocks' rebound loses steam; Portugal eyed

Published 03/23/2011, 09:03 AM
Updated 03/23/2011, 09:05 AM

* FTSEurofirst 300 up 0.1 percent, Euro STOXX 50 down 0.2 percent

* Recently-hammered mining shares rally along with metals

* Portuguese stocks drop as austerity vote looms

* Despite 'black swans', Europe stocks attractive -Amundi AM

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

By Blaise Robinson

PARIS, March 23 (Reuters) - European stocks were almost flat around midday on Wednesday, with their week-long tentative rebound halted by the return of concerns over the euro zone debt crisis.

Stocks reversed early gains and drifted into negative territory after draft conclusions prepared for the euro zone summit showed member states will only take a decision on how to increase the effective capacity of their bailout fund by the end of June and not at this week's summit.

At 1234 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,107.96 points, while the euro zone's blue chip Euro STOXX 50 index was down 0.2 percent at 2,850.13 points.

"Looking at the chart, the Euro STOXX 50 has been in a technical rebound and not in a new upward trend toward recent peaks," said Alexandre Le Drogoff, technical analyst at Aurel BGC, in Paris.

"It should hit a ceiling somewhere between 2,880 and 2,917 points before falling back toward the recent low."

Mining shares -- which had been among the top losers of the market's recent correction fuelled by violence in Libya and the fallout from the earthquake in Japan -- rallied on Wednesday, along with metal prices.

Rio Tinto, Xstrata and BHP Billiton, which had suffered a 16-19 percent correction between mid-February and mid-March while the broad European market lost about 10 percent, were up 1.3-2.3 percent on Wednesday.

Portugal's PSI 20 was down 1.9 percent, with Banco Espirito Santo down 2.5 percent and Banco BPI down 2.6 percent, ahead of a key vote on austerity measures.

Portugal's parliament is expected to reject the measures, which could trigger the collapse of the minority Socialist administration a day before a key European summit.

In a sign that euro zone debt crisis was coming back at the forefront of investors' minds ahead of the summit, Irish two- and ten-year government bond yields hit euro lifetime highs on Wednesday, with uncertainty growing over whether the country can secure better bailout terms at the meeting.

Around Europe, UK's FTSE 100 index was down 0.03 percent, Germany's DAX index down 0.4 percent, and France's CAC 40 up 0.05 percent.

The FTSEurofirst 300 has regained 3.8 percent since reaching a 3-1/2-month low last week, but it is still down 7 percent from a peak reached in mid-February, as the market's tentative recovering loses steam with violence in North Africa and the Middle East boosting oil prices and fuelling concerns over the impact on the global economy.

The fallout from Japan's strong earthquake and tsunami also kept investors on edge. Japan estimated the cost of the damage from its devastating earthquake and tsunami could top $300 billion as authorities in Tokyo warned that babies should not be given tap water because of radiation from a crippled nuclear plant.

Despite the headwinds, Amundi AM's chief investment officer Pascal Blanque sees good value in European equities.

"Beyond these back swans that just hit the markets, European stocks remain attractive in absolute and relative terms," Blanque said.

Amundi AM, which has about 700 billion euros ($990 billion) in assets under management, is 'overweight' on equities, with a preference for European equities, and has recently trimmed its exposure to emerging market equities. (Reporting by Blaise Robinson; Editing by Jon Loades-Carter)

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