European shares rise on rescue fund optimism

European shares rise on rescue fund optimism

London: European shares rose on Wednesday, after reports that France and Germany had agreed a plan to boost the euro zone rescue fund to €2 trillion, which helped to fuel a late rally on Wall Street.

“It’s interesting that despite the denial the market still wants to go higher, which implies the market does think there’s something in the pipeline," Jeremy Batstone-Carr, strategist at Charles Stanley, said.

“We’ll see more whipsawing in the market in the run-up to Sunday (when an EU summit takes place)," he added.

“It remains to be seen whether leveraging the EFSF would actually work."

At 03:00 am, the FTSEurofirst 300 index of top European shares was up 1% at 971.39 points, after falling 0.4% in the previous session.

French banking heavyweight BNP Paribas was among the gainers, up 4% following a decline in the previous session, after Moody’s warned on France’s credit outlook.

The STOXX Europe 600 Banking Index rose 1.9%. The sector was also helped by better-than-expected results, as US earnings season progresses, from companies such as Banc of America, which rose sharply on Tuesday.

Spanish stocks were mostly higher, as Europe-wide optimism helped them shrug off a credit agency downgrade.

Moody’s cut Spain’s bond rating to A1, from Aa2, saying that no credible resolution of the current sovereign debt crisis had emerged and adding: “it will in any event take time for confidence in the area’s political cohesion and growth prospects to be fully restored".

Spain’s Banco Santander and BBVA rose 0.7 and 1.1% respectively.

Tech Stocks Underperform

Technology stocks mostly underperformed after Apple stunned Wall Street by reporting results that missed expectations for the first time in years.

Apple blamed rumours that the new iPhone was on its way, as consumers held back from buying the existing model in the September quarter, hurting demand.

Chip designer ARM fell 1.5%.

“Apple’s results are having a bearing on the way some tech stocks are trading," said Will Hedden, sales trader at IG Index.

He added: “There’s not really much conviction in this (wider market) rally. It seems the volumes are not fantastic."

The pan-European benchmark is up more than 13% from a September low on growing optimism that policymakers would act to tackle the euro zone debt crisis but it is down more than 13% in 2011. Apart from the euro zone crisis, investors have worried about slowing global growth.

Technically, the index may face resistance at around 982, the 38.2% retracement of its fall from a February high to the September low.