Paris: European stocks were slightly up around midday on Wednesday, halting a week-long pullback with investors picking up beaten-down banking and mining shares, but persistent concerns over Ireland’s debt kept gains in check.
At 5:10pm, the FTSEurofirst 300 index of top European shares was up 0.3% at 1,090.04 points, bouncing back after suffering a 2.3% drop on Tuesday -- the index’s biggest one-day retreat in nearly 5 months.
Banking stocks, which have dropped 10% over the past 2 months, regained ground on Wednesday, with Societe Generale up 2% and Banco Santander up 1.1%.
Ireland pledged on Wednesday to work with a European Union-IMF mission on measures to rescue its banks, but the lack of details on a potential bailout plan continued to rattle investors, pulling the euro to near seven-week lows versus the dollar.
“The resurgence of the debt fears is not really a surprise, and it could weigh on equities temporarily, but the bottom line is all the other asset classes are very expensive,” said Marc Touati, head of economic research at Global Equities, in Paris.
“There are bubbles everywhere: on gold, commodities, bonds. The only cheap market is equities. So a drop like we’ve seen yesterday is a good opportunity to buy,” he said.
Europe’s broad STOXX Europe 600 carries a one-year forward price-to-earnings ratio of 10.67, versus a 10-year average of 13.46, according to Thomson Reuters Datastream.
By comparison, the S&P 500 has a one-year forwards P/E of 12.97. Its 10-year average is 15.74, according to Datastream.
Shares of resource-related shares rebounded on Tuesday after surrendering 5% in the previous session, but the gains were limited by lingering worries over the prospect of an interest rate hike from China that could come as early as this week.
Rio Tinto rose 1.1% and Xstrata gained 1.2%.
GlaxoSmithKline rose 2.1% following backing from a U.S. advisory panel for its lupus drug Benlysta, seen as a potential blockbuster.
Around Europe, UK’s FTSE 100 index was flat, Germany’s DAX index was up 0.4%, and France’s CAC 40 was 0.6% higher.
The Euro STOXX 50 gained 0.4% to 2,793.91 points, moving toward a key resistance level at 2,805.95, the 61.8% Fibonacci retracement of the index’s fall from an April high to a May low.
But Alexandre Le Drogoff, technical analyst at Aurel BGC, warned the euro zone’s blue chip index could soon fall again.
“The index seems to be heading toward a test of the lower band of its upward channel. Weakness signals are increasing, with yesterday’s Marubozu of Yin, and there has been a rise in volumes over the past few days, just like we saw during the corrections in January and April,” he said.
“We still recommend to buy volatility both in Europe and the United States.”
The VDAX-NEW volatility index, one of Europe’s main barometer of investor anxiety, was up 0.1% on Wednesday, flirting with a two-week high, after it surged 10% on Tuesday.