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European shares edge up after Fed pledges support

Published 04/28/2011, 05:08 AM
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* FTSEurofirst 300 rises 0.2 percent

* Deutsche Bank, several other companies rise after results

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

By Brian Gorman

LONDON, April 28 (Reuters) - European shares edged up on Thursday, after U.S. Federal Reserve Chairman Ben Bernanke signalled he was in no rush to scale back support for the economy, although strategists said gains might soon reverse.

At 0830 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,151.32 points, its sixth day of gains. It rose 0.3 percent in the previous session to its highest close in eight weeks, buoyed by strong corporate earnings.

The Fed said it would complete the purchase of $600 billion in bonds in June to support the U.S. economy's recovery, and would keep its balance sheet steady. It also repeated it plans to keep overnight interest rates near zero for "an extended period".

"It looks as though we're going to get QE lite," said Justin Urquhart Stewart, director at Seven Investment Management. "The markets will be reassured, though the punch bowl is being replaced by a smaller punch bowl. But with today's (U.S.) GDP figures expected to be weaker, there will be a level of nervousness."

The latest batch of European corporate results was also mostly positive for the markets.

Deutsche Bank rose 4.5 percent after it beat forecasts with a quarterly net profit at a near-record level as crisis-era expansion at its investment bank bore fruit.

The euro zone's biggest bank Santander rose 1.5 percent after posting a small decline in first-quarter net profit as its overseas business, particularly in Brazil, offset a sluggish Spanish home market.

Spain's benchmark rose 1.1 percent.

Thursday sees the deadline for Spanish savings banks to get definitive approval for plans to raise capital from the Bank of Spain.

Across Europe, Britain's FTSE 100 rose 0.1 percent; Germany's DAX and France's CAC40 rose 0.5 and 0.6 percent respectively.

UNILEVER FALLS

Unilever fell 2.5 percent after the Anglo-Dutch consumer goods group posted a rise in first-quarter underlying sales that just missed analysts' average forecast.

Unilever said the impact of higher commodity costs this year would be greater than expected.

German business software maker SAP fell 5.7 percent after first-quarter earnings fell short of market expectations.

Royal Dutch Shell rose 1 percent after it beat forecasts with a 22 percent rise in first-quarter profit, thanks to higher oil and gas prices and fatter refining margins.

Others in the energy sector gained, as crude prices rose to their highest in 2-1/2 years. Gasoline stockpiles fell more than expected, and the dollar hit a three-year low after the Fed's comments.

Total and Repsol both gained 0.7 percent.

The U.S. Commerce Department will release its first estimate of first quarter GDP at 1230 GMT. U.S. economic growth probably braked sharply to an annualised 2 percent rate in the first quarter as higher food and gasoline prices crimped consumer spending.

The Nasdaq hit a 10-year high on Wednesday, and other U.S.indexes hit their highest in nearly three years, helped by strong corporate results, as well as the Fed's comments.

European shares have not achieved the same highs, and are still more than 3 percent below a February peak.

Equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 carrying a one-year forward price-to-earnings of about 10.3 against a 10-year average of 13.5.

But strategists still say that shares are ripe for a correction. There could be a "pullback of between 5 and 10 percent," Urquhart Stewart said.

"(The rally) has been on pretty thin volumes, and an absence of bad news," said Lothar Mentel, chief investment officer at Octopus Investments.

"And there's been no further worsening in the Middle East. But the rally will probably peter out sometime next week after a very good run."

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