London: European shares bounced after a week-long sell-off on Friday, as steady oil prices eased concerns over inflation, and strong company results gave the markets a boost.
Building materials firm Saint-Gobain climbed 5.5% after it gave a strong earnings outlook, and carmaker Volkswagen added 6.2% in response to forecast-beating results.
The pan-European FTSEurofirst 300 index of top shares closed up 1.2% at 1,159.60 points, but still recorded the biggest weekly fall since July 2010 after civil unrest in Libya caused a spike in oil prices and a stock market sell-off.
Buoying equity investor sentiment heading into the weekend was news that top oil exporter Saudi Arabia had increased output to make up for any shortages caused by the Libyan unrest.
That helped steady oil prices off 2-1/2 year highs and tempered some of the inflation concerns across Europe.
“I don’t believe the falls of recent weeks are a fundamental change in markets,” said Geert Ruysschaert, strategist at BNP Paribas Fortis Private Banking. “It’s more a temporary correction, and then the market will go up again.”
Several technical elements supported the rebound on the euro zone’s blue-chip Euro STOXX 50 including the Relative Strength Indicator (RSI), said Philippe Delabarre, technical analyst at Trading Central.
The Euro STOXX 50 index gained 1.2%, while the RSI was at 50.1, well below the 70 and above level that is considered overbought territory.
The VDAX-NEW volatility index, Europe’s main barometer of investor anxiety, was down 5.7% on Friday, taking a breather after a 35% jump earlier in the week.
The higher the volatility index, based on sell and buy options on Frankfurt’s top-30 stocks, the lower investors’ appetite for risky assets such as equities.
German truck maker MAN rose 4.3% on resurfaced talk of a potential offer from peer Scania.
“Talk that it could come to a merger in the coming weeks are getting stronger,” a Frankfurt-based trader said.
“Things seem to become more imminent,” another trader added.
ARM Holdings gained 6%, with traders citing a BofA Merrill Lynch upgrade on the British chip designer as the main influence.
On the downside, British bank Lloyds fell 4.5% after it said its margins would not improve this year and took a £4 billion ($6.5 billion) hit from bad debts in Ireland.
Across Europe, the FTSE 100 index was up 1.4%, but the UK exchange only started trading at 1215 GMT instead of 0800 GMT, with the London Stock Exchange blaming a technical glitch.
Germany’s DAX was 0.8% higher, and France’s CAC 40 was up 1.5%.