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European shares up on firm miners; Bernanke in focus

Published 10/25/2010, 07:47 AM
Updated 10/25/2010, 07:52 AM
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* FTSEurofirst 300 up 0.4 percent, near six-month high

* Miners top the gainers list as metals prices advance

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

By Atul Prakash

LONDON, Oct 25 (Reuters) - European shares rose on Monday to hover just below last week's six-month highs, led by miners after a jump in metals prices on dollar weakeness and with an upgrade for Volkswagen boosting automakers.

At 1122 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,093.44 to trade near Thursday's 1,096.31, the highest since late April.

Miners surged, with the STOXX Europe Basic Resources index rising 2.1 percent, as copper hit a 27-month high on falling stocks, strong demand in China and after the dollar fell as the G20 agreement to shun competitive currency devaluations was taken as a green light to resume dollar selling.

"They struggled to come out with an accord that changes anything practically," said Henk Potts, equity strategist at Barclays Wealth, referring to the G20 meeting.

"There is still a potential risk of competitive currency devaluations, which is a major problem and potentially the first step on the road that leads to protectionism. The market still remains concerned, but surely it looks as if they are at least trying to agree at core understanding, which is helpful."

Most base and precious metals advanced on the fall in the dollar, making metals cheaper for holders of other currencies and helping shares in BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and ENRC -- up 2 percent to 4.3 percent.

"Profitability and earnings are going to be up. This is a sector that will have earnings upgrades. Even if the dollar started to steady, there are supply constraints," Philip Isherwood, European equities strategist at Evolution Securities, said, referring to the mining sector.

Automakers gained, led higher by Volkswagen which rose 5.6 percent, after Credit Suisse hiked its share price target to 130 euros from 102, reiterating its "overweight" rating, following results on Friday.

"Unlike other players, VW has come out of the biggest economic crisis without losing money in a single quarter," Credit Suisse said in a note.

BMW, Daimler AG, Peugeot, Renault, Fiat were up 1 percent to 2.5 percent.

SENTIMENT IMPROVES

Data showing euro zone industrial new orders stronger than expected in monthly terms in August, hopes of further quantitative easing by the U.S., strong company results, and merger and acquisition news also improved market sentiment.

London Stock Exchange and Frankfurt stock market operator Deutsche Boerse rose 5.1 percent and 1 percent respectively after Singapore Exchange's A$8.4 billion ($8.2 billion) takeover bid for ASX Ltd signalled industry consolidation may heat up again.

TeliaSonera gained 2.2 percent after raising its 2010 outlook when posting a higher than expected quarterly profit thanks to smartphone usage at home and economic recovery in emerging markets.

"The third-quarter reporting season has been very strong, with majority of companies exceeding analysts' expectations and that continues to be a very supportive theme," Potts said.

"The outlook from companies still remains relatively positive as well. Obviously, the authorities' efforts to secure recovery through quantitative easing has also seen as positive for macroeconomic backdrop given the weakness that you have seen more recently," he said.

The market awaited a speech by U.S. Federal Reserve chairman Ben Bernanke at 1230 GMT for indications whether he was leaning toward aggressive quantitative easing or a moderate approach. (Additional reporting by Brian Gorman; Editing by Dan Lalor))

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