Strong miners boost European shares

Mon Sep 3, 2012 5:22am EDT

* FTSEurofirst 300 up 0.4 percent

* Miners buoyed by China stimulus hopes

* Fresenius up, drops Rhoen takeover plan

* ARM hurt by Deutsche Bank downgrade

By Tricia Wright

LONDON, Sept 3 (Reuters) - European shares advanced on Monday, led higher by mining stocks after weak data from China fuelled hopes for further stimulus from the world's top metals consumer, in the run-up to this week's key European Central Bank meeting.

Miners were the standout risers, up 1.6 percent, as two complementary surveys showed China's manufacturing sector has been badly hit by slowing new orders, results which could strengthen the case for further policy steps to bolster growth.

Kazkhmys, Rio Tinto and BHP Billiton enjoyed respective gains of 2.5 percent, 2.3 percent, and 2 percent.

"The market cycle is much more connected to the monetary cycle than the economic cycle," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

"Economic data remains weak, what we get from China is not too fantastic at the moment. You could expect that to have a negative impact on the markets, but I think that markets will really focus on liquidity injections that are going to come."

The FTSEurofirst 300 was up 0.4 percent at 1,086.82 by 0856 GMT, in trading volume at 13 percent of its 90-day daily average, having ended 0.5 percent higher on Friday after U.S. Federal Reserve Chairman Ben Bernanke kept the door open for further stimulus if needed.

The focus is now squarely on the ECB's meeting on Thursday, with investors hopeful ECB President Mario Draghi will offer some details about the bank's bond-buying scheme to lower borrowing costs of countries such as Spain and Italy.

"It's all on hold for the ECB is what we're seeing... I rather fear that we're not going to get clarity. We'll probably sell off if we don't get a full bond-buying programme," Joe Rundle, head of trading at ETX Capital, said.

Rundle reckoned that, in the case of disappointment, the FTSEurofirst 300 could test the 1,050 area, support seen at the beginning of August.

Societe Generale said in a note that it expected new clues from Thursday's meeting, but with final details only after a German Constitutional Court ruling on Sept. 12 that could have an impact on the ECB's bond-buying plans.

It added, however, that a rate cut may come this week.

Elsewhere among the top gainers on Monday, Fresenius climbed 2.5 percent after pulling the plug on plans to take over Rhoen-Klinikum, which slid around 20 percent.

Volume in Fresenius was solid, at 34 percent of the 90-day daily average.

ARM, meanwhile, featured on the FTSEurofirst 300 fallers' list, off 2.4 percent, after Deutsche Bank cut its rating for the British chip firm to "sell" from "hold", mainly on valuation grounds.

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