European shares rise as banks rebound

Tue Jul 19, 2011 8:16am EDT

Related Topics

* FTSEurofirst 300 index rises 0.9 percent

* Banks gain on technical rebound

* Thursday's euro zone meeting eyed

By Joanne Frearson

LONDON, July 19 (Reuters) - European shares rose on Tuesday as investors bought battered bank shares following a sharp sell-off on Monday, but gains were only seen as a technical rebound, with euro zone leaders still lacking agreement over a second Greek bailout.

Banks were among the best performers, with the STOXX Europe 600 Banks index rebounding from two-year lows made in the previous session, hurt by ongoing concerns the sector would have massive writedowns if Greece defaulted.

Banks which had been heavily sold-off in the previous session gained, with Commerzbank , Societe Generale and BNP Paribas rising 3.4 to 4.7 percent.

Italian banks Intesa Sanpaolo , UniCredit and Banca Monte dei Paschi di Siena rose 3.6 to 5.3 percent as traders said they were taking their cue from the bond market, with the Italian 10-year BTPs and German Bunds narrowing.

Technical indicators showed European bank shares were deep in "oversold" territory, with its 14-day Relative Strength Index reaching 26.5 on Monday. Thirty or below is considered oversold.

Valuations on the banking sector have fallen to levels last seen in March 2009. Thomson Reuters Datastream data showed the sector carries a 12-month forward price-to-earnings ratio of 7.4 times versus a 10-year average of 11.

Euro zone leaders meet on Thursday to agree a second rescue package for Greece and to devise a plan to prevent contagion to other euro zone debt-laden countries, but few are expecting a permanent solution to the debt crisis.

"The banks were heavily sold off yesterday and maybe some investors think they have gone too far," said David Moss, director of European equities at F&C Asset Management, which has $11.5 billion of assets under management in Europe.

"We do own some of the better capitalised banks and have BNP Paribas in the portfolio. We think relative to the size of its capital base compared to its exposure in Greece it can deal with the issues," he said.

Moss did not like banks such as Credit Agricole and said it "would likely suffer from loan losses with the harsh austerity measures in Greece".

Separately, a standout gainer in the banking sector was Nordea , up 5.3 percent following second-quarter earnings with analysts citing relief that there were no unpleasant surprises in its results.

By 1138 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.9 percent at 1,076.96 points, bouncing off a support level of 1,066. This is the March low the index neared in the previous session and a figure it had previously rallied from.

But the index was expected to trade sideways in a range between its March low and 1,104, a level which showed resistance in June when euro zone ministers failed to agree on how to share the costs of a new bailout for Greece.

U.S. DEFAULT WORRIES

Worries about default were not isolated to Greece and investors will also be keeping an eye on the situation in the United States.

The White House was pursuing a last-ditch plan with Congress to raise the U.S. debt ceiling to avert a United States default.

"We are mindful not to get too excited on this small push up this morning and need to see some clarity on the EU sovereign and U.S. debt ceiling events to buy into the rally," Atif Latif, director of trading at Guardian Stockbrokers, said.

"The major risk lies with a downgrade for U.S. Debt and a continuation of poor fiscal policy management in the EU which will lead to a sustained sell-off and sideways trading range."

Technology shares featured among the best performers, boosted by forecast-beating results from IBM , increasing investor expectations 2011 will be a good year for the sector.

The STOXX Europe 600 Technology index gained 2.3 percent. (Reporting by Joanne Frearson; Editing by Jon Loades-Carter) ============================================================ For rolling updates on what is moving European shares please click on ============================================================ For pan-European market data and news, click on codes in brackets: European Equities speed guide................... FTSEurofirst 300 index.............................. STOXX Europe index.................................. Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurofirst 300 sectors................... Top 25 European pct gainers....................... Top 25 European pct losers........................

Main stock markets: Dow Jones............... Wall Street report ..... Nikkei 225............. Tokyo report............ FTSE 100............... London report........... Xetra DAX............. CAC-40............... World Indices.....................................<0#.INDEX> Reuters survey of world bourse outlook......... Western European IPO diary......................... European Asset Allocation........................ Reuters News at a Glance: Equities................. Main currency report:.................................

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article