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Miners boost Europe shares as stimulus hopes rise

Published 10/06/2010, 12:43 PM
Updated 10/06/2010, 12:44 PM
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* FTSEurofirst 300 rises 0.5 percent, up for 2nd session

* Miners gain as metals rise; gold touches new high

* BoE, ECB meeting eyed on Thurs; Fed stimulus hopes grow

By Harpreet Bhal

LONDON, Oct 6 (Reuters) - European shares rose on Wednesday, with mining companies among the top gainers, as expectations grew that central banks would embark on further stimulus measures to support global economic growth.

The pan-European FTSEurofirst 300 index of top shares closed up 0.5 percent at 1,070.68 points, after ending higher in the previous two sessions.

Mining firms rose 2.3 percent, boosted by gains in three-months copper and a fresh record high for gold after talk of extra stimulus from the U.S. Federal Reserve and other central banks put pressure on the dollar.

Speculation of further quantitative easing measures picked up after the Bank of Japan unexpectedly cut rates close to zero on Tuesday and said it would pour money into the markets through asset purchases.

"The expectation that the Fed might announce more quantitative easing at its next meeting is mounting and that is helping equity markets in the short term," said Tammo Greetfeld, equity market strategist at UniCredit in Munich.

However, some concerns over the fragile U.S. labour market lingered as the ADP Employer Services report showed U.S. private employers unexpectedly cut 39,000 jobs in September. The data is seen as a forerunner to the U.S. government's key non-farm payrolls report, due on Friday.

The heavyweight banking sector also helped push the index higher, with BNP Paribas, Societe Generale and Deutsche Bank up 0.7 to 2 percent.

Greek banking stocks added 5.5 percent, with traders attributing the rise to tighter yields and relief that National Bank of Greece's rights issue will be covered. The bank rose 6.8 percent.

Highlighting ongoing concerns over euro zone peripheral countries, Fitch downgraded Ireland's debt to A+ with a outlook negative, indicating that it may act to downgrade the country again in the future.

Irish bonds underperformed Bunds after the downgrade, but the impact on the equity market was more muted, with Dublin's benchmark index up 1.1 percent.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 rose 0.8 to 0.9 percent.

SPOTLIGHT ON CENTRAL BANKS

Investors are likely to focus on interest rate decisions from the Bank of England (BoE) and the European Central Bank (ECB) on Thursday for any indication of further stimulus.

The BoE is likely to be torn three ways for the first time since November, with dissenting voices supporting both tighter and looser policy due to the highly uncertain economic outlook.

"Tomorrow's BoE's interest-rate announcement at midday could have a strong bearing on whether the (FTSE 100) index will be able to sustain these gains, or will investors look to book profits immediately before the week is out," Yusuf Heusen, senior sales trader at IG Index wrote in a note. Among individual movers, budget airline EasyJet rose 12 percent after saying it expected to beat its profit expectations for the year following a strong performance over the summer.

Within the sector, British Airways, Ryanair and Air France-KLM gained 1.4 to 4.5 percent.

On the downside, British software firm Autonomy slumped 16.3 percent after it said it would cut full-year revenue guidance by about 3 percent after weaker than expected demand. (Editing by Louise Heavens)

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