LONDON: European shares bounced off a two-week low on Thursday as near-term technical factors prompted investors to buy, while Old Mutual led insurers higher after the company announced plans to sell its Nordic unit for $3.2 billion.
The STOXX Europe 600 insurance index rose 1.3 percent to top the sectoral gainers' list after Old Mutual said the sale comprised long-term savings and banking operations in Denmark, Norway and Sweden, sending its shares up 8 percent on hopes the deal will boost investor returns.
At 0948 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 956.98 points after rising as high as 962.93 earlier in the day. The index fell 2.1 percent in the previous session.
The euro zone's blue-chip Euro STOXX 50 index was up 0.2 percent at 2,208.49 points. Analysts said the index was helped by technical factors, but the rally was not likely to sustain.
"The reversal from the recent top has equated to approximately a 61.8-percent retracement of the rally that began in late November. As a result, it has moved towards oversold levels and investors are looking for some value in certain beaten-down stocks," said Bill McNamara, technical analyst at Charles Stanley.
"But this rally is likely to be short-lived as there seems to be no follow-through buying after a good day. Investors are losing patience with the market and are starting to think that there isn't going to be a positive and lasting solution of the euro zone problems anytime soon."
The stock market was in a downtrend and its recent rally to break the trend had failed, analysts said, adding the market was expected to be under pressure in the fist quarter of 2012 as most economists were now forecasting the euro zone and Britain would head into recession next year.
The number of Britons out of work rose to its highest in more than 17 years in October as firms facing the threat of a renewed recession cut back on staff. In Germany, manufacturing contracted for a third straight month in December.
"People are realising that it will take a while before things get better. In the short term, we are stuck with some very nasty economic data and going into 2012, economic conditions will not be very favourable," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
Uncertain economic conditions prompted investors to buy traditionally defensive stocks. Healthcare shares were among the top gainers, with the sector index up 0.9 percent.
"We are witnessing a touch of bargain hunting after sharp declines in the recent past. The market is lacking direction and early gains could evaporate quickly as the comments of rating agencies will remain in the background," said Keith Bowman, equity analyst at Hargreaves Lansdown.
On Wednesday, Fitch Ratings downgraded Credit Agricole's Long-term Issuer Default Rating to A-plus from AA-minus.
The French bank's shares fell 1.7 percent after it warned late on Wednesday that it would post a loss for 2011 and said it would write off 2.5 billion euros worth of assets and cut 2,350 jobs in a cull of its investment banking operations.
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