Rising bank stocks lift European shares, ACS soars

Thu Aug 16, 2012 1:03pm EDT

* FTSEurofirst up 0.3 pct, Euro STOXX 50 rises 1.1 pct

* Technical "golden crosses" on markets spurring buying -traders

* Spain's ACS surges 17.7 pct, bank stocks also outperform

By Sudip Kar-Gupta

LONDON, Aug 16 (Reuters) - European shares rose on Thursday to within touching distance of their 2012 peaks, lifted by bank stocks and propped up by persistent expectations of new stimulus measures to tackle the global economic slowdown and euro zone debt crisis.

The FTSEurofirst 300 index ended up 0.3 percent at 1,104.37 points, near its 2012 closing high of 1,106.79 points reached on March 16.

The Euro STOXX 50 rose 1.1 percent to 2,456.53 points, with Spain's benchmark IBEX equity index rising by 4.1 percent, as traders bet on help from the European Central Bank for the debt-laden Spanish economy and its banks.

However, some investors cautioned that the market could soon fall back again.

Previous attempts to find solutions for the euro zone debt crisis, which led to a bailout of Greece, have stalled due to disagreements among European leaders, and below-average trading volumes also pointed to a lack of conviction in the rally.

Trading volumes for the Euro STOXX 50 came in at 70 percent of the usual 90-day average.

"There's still a lot of optimism that there will be some deal on more quantitative easing. But it's a low volume rise on a lot of hope without a lot of substance," said Brown Shipley fund manager John Smith.

"I'm not convinced that this rise will be sustained," he added.

The European bank index was the best-performing European equity sector, rising by 1.6 percent, while the utility index advanced by 1.5 percent.

Sycomore Asset Management senior fund manager Gilles Sitbon said he had added to holdings on the STOXX euro zone bank index this month.

The index is down around 6 percent so far this year, with bank stocks suffering due to worries about their exposure to the European debt crisis, but some traders have used the decline to buy up badly beaten shares on the cheap.

"Since the start of August, the euro zone banking index has risen nearly 10 percent in the month-to-date, and we can probably squeeze up further into the month," said Sitbon.

SPANISH COMPANY ACS SURGES HIGHER

Spanish infrastructure company ACS surged by 17.7 percent to top the FTSEurofirst 300's leaderboard, although the stock remains down by roughly 30 percent so far this year.

Clairinvest fund manager Ion-Marc Valahu said the fact that ACS had a dividend yield of roughly 15 percent made it a stock worth holding, despite its slump over the course of the year.

"It has a 14.5 percent dividend yield, and they paid out throughout the crisis. People are starting to see that there's a lot of undervaluation in the periphery markets," he said.

Traders added that the fact that some key European equity markets, such as Britain's FTSE and France's CAC-40 , were triggering a bullish technical signal known as a 'golden cross' was also helping the buying momentum.

The "golden cross" occurs when an index's 50-day moving average coincides with the 200-day moving average and is used by a number of algorithmic trading programmes as an automatic 'buy' trigger.

"High frequency computer trading is 50 percent volumes picking up on prices crossing the moving averages on the way up, so it keeps the momentum going. Momentum feeds momentum," said Sycomore Asset Management's Sitbon.

However, others said they would still err on the side of caution and use these rallies to take profits by selling shares previously acquired during falls in the market.

Central Markets senior broker Joe Neighbour recommended selling Germany's DAX at around the 7,000 point mark, and the Euro STOXX 50 at around the 2,450 point mark.

"We're aiming to sell equity markets at these levels. We think the upside potential is pretty limited," he said.

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