European shares return to near multi-year highs

European shares rose back to near multi-year highs on Tuesday after a European Central Bank policymaker said it would front-load an asset purchase scheme aimed at boosting the euro economy.
The comments by Benoit Coeure led the euro to trade below $1.12 for the first time in a week, juicing investor appetite for stocks, especially in the exporter-heavy German DAX index. Euro weakness in the first three months of the year added 17 billion euros ($19 billion) to German blue chip companies' revenues, according to EY.
Athens stocks, which have underperformed this year due to worries over Greece's debt, also rose after the labour minister said Greece would soon conclude a deal that could unlock more loans. The pan-European FTSEurofirst 300 index closed up 1.7 percent at 1,606 points, shrugging off a survey that showed German investor morale fell by more than expected in May.
The FTSEurofirst has now recovered its losses since the end of April, with some investors saying the past few weeks' volatility linked to a sell-off in bond markets had not altered their positive stance on equities.
"I still think that bonds are risky and that equities remain the asset of choice," said Francois Savary, chief strategist at Swiss bank Reyl.
But some fund managers warned European equities were by no means cheap and that it was time to trim exposure to blue chip firms that pay a reliable dividend. "I have tactically cut back on financials because of the growing risk around Greece and have increased my exposure to real estate," said Michele Patri, portfolio manager at AllianceBernstein.
"I am not anymore in ultra-high-quality names. I don't think the market valuation is cheap."
A majority of economists polled by Reuters said the euro zone economy is on a sustainable recovery path although growth will plateau.
Among big movers, media group Reed Elsevier rose by 2.1 percent after Goldman Sachs raised its rating to "buy" from "neutral".
Vodafone fell 3.2 percent as some traders said the mobile network operator's guidance had been slightly below forecasts, even though it returned to quarterly sales growth.
According to data from Thomson Reuters StarMine, 61 percent of the companies on the pan-European STOXX 600 index have beaten or met market expectations with their first quarter results, while 39 percent have missed expectations.