Paris: European shares gained ground on Wednesday, extending the previous day’s tentative recovery from three-month lows as upbeat results soothed investors’ worries on the earnings season and eclipsed lingering fears over the euro zone debt crisis.
At 4:37pm, the FTSEurofirst 300 index of top European shares was up 0.8% at 1,040.72 points, while the euro zone’s blue chip Euro STOXX 50 index was up 1.7% at 2,322.88 points.
Technology shares set the pace, boosted by forecast-beating results from mobile network gear maker Ericsson, up 2.2%, and from Apple which soared around 10% in Frankfurt.
Alcatel-Lucent was up 5.9% while Nokia gained 2%.
Shares in automakers also gained ground, helped by reassuring results from PSA Peugeot Citroen, which climbed 3.9%, and car parts maker Valeo, up 9.5% after confirming its profit goal for the year.
But despite the two-day rebound, Barclays France fund manager Philippe Cohen was skeptical about the market’s recovery.
“This market is dominated by flows, and fundamentals are eclipsed. The earnings season is relatively reassuring so far, but people have in mind the coming elections in France and Greece,” he said.
“Our recommendation to active investors is to use this technical rebound to trim their exposure on the short term.”
UK stocks underperformed, with the FTSE 100 up only 0.2%, after data showed the country has unexpectedly slipped into recession, with a 0.2% fall in first-quarter GDP which comes after a 0.3% decline in the fourth quarter.
Wm Morrison Supermarkets was down 0.9% while BP lost 0.6%.
Elsewhere in Europe, Germany’s DAX index gained 1.2%, France’s CAC 40 added 1.6%, while Spain’s IBEX, which had sank to a three-year low on Monday, was up 2.5%.
However, caution ahead of a U.S. Federal Reserve statement following the conclusion of its two-day policy meeting, due after the European close, was seen limiting gains on Wednesday.
Investors are hoping for clues on the prospects of a new round of quantitative easing from the US central bank to support the fragile economic recovery.
BUY EXPOSURE TO ASIA
“We’ve moved to the sidelines, to let the market slip towards December lows, at which point it will be time to start buying again,” David Thebault, head of quantitative sales trading at Global Equities, said.
“For ‘long-only´ investors, the only sensible strategy at the moment is to buy a basket of stocks exposed to Asian growth. Buy LVMH, buy Volkswagen, buy Remy Cointreau.”
Shares in French spirits group Remy Cointreau were up 2.3% on Wednesday, a day after it unveiled an upbeat outlook for the year on the back of booming demand for premium cognac in China. The stock has surged 33% this year, while France’s broad SBF120 index is up 3% in 2012.
Euro zone banking stocks - hammered in the past month by renewed fears about the region’s debt crisis and the risk of another round of massive writedowns for lenders - featured among the top gainers on Wednesday, with Societe Generale up 5.6% and Commerzbank up 4.7%.
On the technical front, the hourly charts of indexes such as the Euro STOXX 50 showed a double-bottom pattern that was confirmed on Wednesday morning, which led Day-by-Day chartist Julien Nebenzahl to turn bullish on the short term for the market.
But the overall picture is not that bright. The volume of put (options) traded has been dramatically falling since Monday and implied volatility did not rise very strongly,“ he said.
“Investors are not really anxious. This confirms that the current recovery is a short-term one, not the start of a new bullish cycle for two-three months,” suggesting that investors had not yet had the signals needed to jump into the market and drive it higher.
The put/call ratio of Euro STOXX 50 options, a ratio of the trading volume of put options versus call options used to gauge investor sentiment, has sharply dropped this week, hitting 0.68 on Wednesday, signalling investors were not taking measures to protect themselves for further falls, despite the market’s month-long slide.
