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Miners drive European shares up as dollar weakens

Published 10/25/2010, 05:12 AM
Updated 10/25/2010, 05:16 AM
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* FTSEurofirst 300 rises 0.4 percent, near 6-mth high

* Miners gain as metals prices rise

* LVMH and Hermes rise after LVMH buys stake

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

By Brian Gorman

LONDON, Oct 25 (Reuters) - European shares edged higher on Monday, led by miners on stronger metals prices, after a Group of 20 agreement failed to stop the trend of a weaker dollar.

At 0819 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,093.89 points, near a six-month high, after rising 0.4 percent last week. The benchmark is up more than 69 percent from its lifetime low of March, 2009, as several countries have emerged from recession, helped by fiscal stimulus worldwide.

The dollar fell broadly on Monday after a G20 meeting produced enough agreement despite discordant policies to keep the status quo on the trade of selling the U.S. currency and buying stocks and commodities such as gold.

Gold rose more than 1 percent, off its 2-1/2 week low hit on Friday. Copper hit a 27-month peak.

Miners that rose included Antofagasta, BHP Billiton, Kazakhmys, Rio Tinto and Xstrata, up between 2.5 and 4.2 percent.

A weaker dollar usually boost dollar-denominated metals prices.

Some analysts played down the importance of the G20 and emphasised the probability that the U.S. Federal Reserve will announce further monetary easing next week. Fed chairman Ben Bernanke may give hints on quantitative easing (QE) in a speech later in the day.

"They (the G20) talked about competitive devaluation and decided to have a talk about it another time," said Philip Isherwood, European equities strategist at Evolution Securities.

"It's about next week in terms of QE. The Fed believes unemployment is too high and inflation is too low. We should get QE."

On the miners, Isherwood added: "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."

The mining sector was also boosted by a generally positive note from Goldman Sachs.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC40 rose between 0.5 and 0.8 percent.

EXCHANGES RISE

London Stock Exchange and Frankfurt stock market operator Deutsche Boerse rose 4.1 and 5.8 percent respectively after Singapore Exchange's A$8.4 billion ($8.23 billion) takeover bid for ASX Ltd signaled industry consolidation may heat up again.

French luxury goods group LVMH rose 3.4 percent after saying on Saturday it was buying a minority stake worth 1.45 billion euros in family controlled handbag maker Hermes, which rose 7.3 percent.

Preferred shares in Volkswagen rose 5.4 percent, after Credit Suisse hiked its share price target to 130 euros from 102 euros, reiterating its "overweight" rating, following results on Friday.

However, truck maker Scania fell 6.4 percent after third-quarter sales grew less than expected, though it posted a bigger-than-expected rise in pretax earnings.

Italy's Banco Popolare fell 3.7 percent after approving the launch of a capital increase of up to 2 billion euros to boost its capital ratios, reimburse government-backed bonds, and to support lending.

Later in the session, investors' attention will turn to U.S. homes sales data, giving an indication of the strength of the recovery in the world's biggest economy. (Editing by Erica Billingham)

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