European shares flat; focus on mixed results, strong euro

LONDON: European shares were little changed on Thursday after sharp falls the previous day, with any recovery capped b
07 Feb, 2013

 

Shares in Statoil rose 1.6 percent after the Norwegian oil and gas group reported profits that beat expectations and raised its dividend.

 

UK telecoms firms and market heavyweight Vodafone rose 1.9 percent, with broker Liberum Capital highlighting strong margins and a good performance at US joint venture Verizon Wireless.

 

They helped buoy up the pan-European FTSEurofirst 300 index , which was flat at 1,152 points at 0902 GMT, offsetting falls in French pharmaceutical group Sanofi, which gave a disappointing outlook for this year.

 

The euro zone Euro STOXX 50 rose 0.2 percent to 2,621.72 points after shedding 33.86 points on Wednesday as France and Germany aired their difference about the strength of the euro currency.

 

The index was finding technical support after closing above 2,611 points, its May and September 2012 top in the previous session, in a sign some investors were still prepared to buy on dips.

 

"Investors are looking for things to be afraid of and at the moment you have political issues," a German trader said.

 

"The (market) correction is already 80-90 percent over and some people are already buying on the dips."

 

The trader said he expected the market to rally further, helped by improving economic data in the euro zone.

 

But he said investors had become more selective after a 34 percent surge in the Euro STOXX 50 between June 2012 and last month, and were looking to buy individual stocks rather than sectors or indexes.

 

He was snapping up shares in construction group Hochtief up 1.5 percent to 48.2 euros, after German newspaper WAZ reported the group's new head is considering selling the service and project development businesses.

 

EURO CONCERNS

 

Broader sentiment was more fragile, with investors fretting that further euro strength could start hurting exporters and a corruption scandal in Spain could cause political instability and derail the country's efforts to keep control of its debt.

 

Investors will closely watch the results of a Spanish bond auction at around 0940 GMT to see the impact of the uncertainty on the country's borrowing costs.

 

The European Central Bank is seen holding interest rates on Thursday, with the announcement due at 1245 GMT. But all eyes will be on President Mario Draghi's press conference starting at 1330 GMT, where he was likely to face a grilling over the ECB's sensitivity to the euro's recent sharp rally, as well as over an Italian banking scandal.

 

Akshay Krishnan, senior research analyst for global macro strategies at Stenham Asset Management, said investors were likely to start worrying about the impact of a strong euro on the region's exporters if the single currency, trading at around 1.356 against the dollar on Thursday, were to approach $1.40.

 

"(Our macro managers') view is if the Euro continues to appreciate you might see clearer rhetoric from the ECB regarding euro strength," he said

 

"There is clearly a risk if either the ECB were to disappoint or economic growth were to lag, you could see risk assets fall, especially with the rally we've had."

Copyright Reuters, 2013

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