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Travel shares help Europe stocks end losing run

Published 10/05/2010, 07:36 AM

* FTSEurofirst 300 up 0.2 percent after six days of declines

* TUI Travel jumps 4.5 percent after bookings update

By Atul Prakash

LONDON, Oct 5 (Reuters) - European shares edged higher on Tuesday to snap a six-session losing streak, with a surprise rise in British services activity improving sentiment and a jump in TUI Travel on booking numbers boosting travel stocks.

At 1059 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,052.60 points after rising to a high of 1,056.68 earlier in the session and hitting a one-month low on Monday.

Ireland's benchmark index rose 0.6 percent, shrugging off Moody's Investors Service's warning it may cut the country's credit rating again, citing the huge bill for cleaning up its banks announced last week.

Travel and leisure shares featured among the top gainers, with the European sector index rising 0.3 percent after TUI Travel, Europe's largest travel company, said holiday bookings for winter and next summer were encouraging.

TUI shares jumped 4.5 percent, while Ryanair, FirstGroup and Thomas Cook advanced by between 0.4 percent and 1.9 percent.

"It feels like a tug of war between the bulls and bears. As we are approaching the beginning of the next earnings season, the market is a bit unnerved," said Lothar Mentel, chief investment officer at Octopus Investments.

"People are looking at the technical indicators and a lot of these models are giving buy signals. Technicals are improving every day."

The Euro STOXX 50, the euro zone's blue-chip index, rose 0.4 percent to 2,710.56 points to hover near its 50-day moving average, now at 2,738.58. The index faces strong resistance at its 50-percent Fibonacci retracement of the index's fall from an April high to a May low at 2,737.62.

MACRO LIFT

The market also got some support from macroeconomic numbers, with a survey showing British services activity growth unexpectedly accelerated in September from a 16-month low.

Later in the week, investors will focus on U.S. non-farm payrolls on Friday, and interest rate decisions from the Bank of England (BoE) and the European Central Bank (ECB) on Thursday.

"With the ECB and BoE set to deliver their rate verdicts and the spectre of further QE measures out of the U.S. Federal Reserve, there's an awful lot of uncertainty in play and this can be expected to limit gains for stocks," said Ben Critchley, sales trader at IG Index.

The STOXX Europe 600 Financial Services index rose 0.7 percent, with asset manager Azimut rising 2.7 percent after Equita added it to a recommended stock-picking portfolio.

Man Group, Henderson and Deutsche Boerse gained between 1.2 percent and 3.1 percent.

Among individual movers, British satellite company Inmarsat fell 4.2 percent after U.S. hedge fund Harbinger Capital Partners said it has sold a 14.1 percent stake in the company.

Tesco fell 0.8 percent. The world's third-biggest retailer said it believes the global economy is recovering strongly and growth in emerging markets will help to prevent developed economies from falling back into recession.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 were flat to 0.6 percent higher. The Thomson Reuters Peripheral Eurozone Countries Index was up 1.2 percent.

"It's a modest bounce after a poor day yesterday," said Peter Dixon, economist at Commerzbank. "But we are in a range-trading environment and investors are still looking at what is happening in the economy and how earnings will be." (Additional reporting by Harro Ten Wolde and Joanne Frearson; editing by David Hulmes)

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