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Business News/ Money / Europe stocks extend sharp rally on economic hopes
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Europe stocks extend sharp rally on economic hopes

Europe stocks extend sharp rally on economic hopes

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Paris: European stocks were up 0.6% around midday on Thursday, trading at 11-month highs with banks such as UBS pacing the gains, driven by mounting optimism over a quick global economic recovery.

But the gains were limited by weaker-than-expected quarterly software sales from US firm Oracle Corp, which dragged down tech shares such as Germany’s SAP and France’s Dassault Systemes 1.7% and 3.2% respectively.

At 4:40pm, the FTSEurofirst 300 index of top European shares was up 0.6% at 1,011.67 points, rising for the ninth time in 10 sessions.

The benchmark index, which is up 22% so far this year, has jumped 57% since hitting a record low last March. It is on track to record a 19% gain for the quarter, which would be the index’s strongest quarterly performance in almost a decade, but is still down 38% from a near seven-year high touched in mid-2007.

“We’ve seen panic selling last winter, now we’re seeing panic buying. Investors who have been ‘underweight´ on equities now worry about missing the big rally," said Jean-Marie Mercadal, CIO of OFI Asset Management, in Paris.

“But the easy part of the rebound is done. Stocks still have room to grow, probably 20% over the next six months, but it’s not going to be automatic. People will have to do stock picking."

Banks - which have shot up 174% since early March - were the biggest gainers on Thursday, up 1.1%, with UBS up 1.3%, Unicredit up 1.1% and Societe Generale up 3.4%.

Citigroup said in a note that it preferred sectors like financials and energy as they “should continue to benefit from an earnings recovery and are reasonably valued".

“After the biggest fall in over two decades, global 12-month forward earnings expectations have risen by almost 10% since May lows. It looks like we have entered the recovery phase of the profits cycle," the broker said.

Oil companies rise

Shares of energy companies were also on the rise, with Total up 1% Royal Dutch Shell up 0.6% and Repsol up 1.2%.

Tullow Oil gained 2.9%, extending Wednesday’s 9.2% rise, after the oil explorer said it had struck what may turn out to be the largest oil find yet in a block it plans to partly sell-off in Uganda’s Lake Albert basin.

Across Europe, Britain’s FTSE 100 rose 0.8%, Germany’s DAX advanced 0.5% and France’s CAC 40 gained 0.4%.

US stocks rose for a third day on Wednesday, hitting fresh 2009 highs in a broad-based rally after data suggested a stronger-than-expected global recovery, while Asian stocks hit their highest level in 13 months on Thursday.

Later in the session, US August housing starts and building permits, along with the September Philly Fed index and the latest weekly initial jobless claims, will provide a further gauge of the state of the world’s largest economy.

Among other individual movers, EADS advanced 6.2%, topping the FTSEurofirst 300 gainers, after Morgan Stanley upgraded the Airbus maker’s parent to “overweight" from “equal weight".

TomTom dropped 5% after Banc of America-Merrill Lynch cut the navigation device maker to “underperform". The broker said it saw better alternatives in Garmin and Logitech.

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Published: 17 Sep 2009, 05:16 PM IST
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