European shares end flat as US data fuels rebound

Fri Nov 9, 2012 1:18pm EST

* Euro STOXX 50 flat at 2,479.82 after late bounce

* Index poised for fresh gains - Trading Central

* FTSEurofirst 300 down 0.05 pct

* Strong U.S. data fuels bounce, counters fiscal cliff worries

By Francesco Canepa

LONDON, Nov 9 (Reuters) - European shares recovered in late trade on Friday and geared up for fresh gains after a batch of strong U.S. data injected some optimism about growth in the world's largest economy and fuelled a technical rebound.

A sharp increase in September U.S. wholesale inventories and sales, coupled with a rise in consumer sentiment this month, helped act as a counterweight to persistent concerns around the outlook for U.S. fiscal policy.

The euro zone blue-chip Euro STOXX 50 index provisionally closed flat at 2,479.82 points, paring losses after breaking above a late October low in the 2,467 area.

Concerns about a "fiscal cliff" of automatic tax hikes and spending cuts worth $600 billion and due to kick in on Jan. 1 had pushed the index 2.7 percent lower in the previous two sessions.

"We think that an agreement will be reached and the fiscal cliff is going to be sized down to $250 billion ," Matthias Thiel, a strategist at M.M.Warburg & Co in Hamburg said.

"There is a chance the negotiations are going to frighten the stock market in the short term but in general we think that a solution should be reached and that's why investors should buy on those dips."

Thiel expected economic recovery in the United States and emerging market to help U.S. and core European equities rally this year and the next, adding he expected Germany's Dax , which closed down 0.6 percent at 7,163.50 on Friday, to end 2012 at 7,500-7,600 and 2013 at 8,000.

Charts on the Euro STOXX 50 December futures also pointed to fresh gains after the contract resumed its ascending trend.

"Prices just bounced off a daily ascending trend line," said Philippe Delabarre, an analyst at Trading Central.

He also highlighted the contract's intraday Relative Strength Index, a momentum indicator, pushed above the 50 percent retracement of a fall in the previous two days.

GREEK DRAMA

But M.M.Warburg & Co's Thiel warned markets were likely to be volatile in the coming weeks, arguing a meeting of euro zone finance ministers on Monday was likely to disappoint the market by failing to provide any solution to Greece's urgent fiscal problems.

Ministers are unlikely to release a new tranche of loans to Greece on Monday as there is no agreement yet on how to make its debt sustainable, but Athens is set to get two more years to cut debt, officials said.

Uncertainty about Greece's future weighed on euro zone banks , down 1.3 percent on Friday, which are large holders of the region's sovereign debt and depend on the health of its economy and wholesale funding market.

France's Credit Agricole dropped 5.9 percent drop in volume over twice its average after unveiling $4.6 billion of writedowns, including on investments in Greece, Italy and Spain.

As risk aversion dominated the day, the healthcare sector , generally seen as a defensive play, was the best performer, rising 0.9 percent.

It was boosted by Denmark's Novo Nordisk, which jumped 7 percent in volume four time the average after an advisory panel to the U.S. Food and Drug Administration voted to recommend approval of its long-acting insulin degludec.

Novo Nordisk was the top riser on the pan-European FTSEurofirst 300 index, which ended the day 0.1 percent lower at 1,097.18, having hit an intra-day low of 1,086.11 points.

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Comments (1)
Innocentious wrote:
Okay so lets talk $250 Billion… At a velocity of money rate of 1.15% that still means the US economy drops 1.6% in GDP, this translates to an even SLOWER recovery with a risk of recession and layoffs. Currently main growth has only been fueled by deficit spending ( the ‘stimulus’ never really ended ) Add to this that US companies MUST now begin to prepare for the AHA in earnest. This will place downward pressure as well as companies restructure to fall into the above rules. Outsourcing will be a large factor as well in the coming year as US companies flee to countries that actually have more economic opportunity. Dragging growth down by another 1% or so… Even at the $250 Billion mark I have a bad feeling in my gullet… But please buy on the dips…

Nov 09, 2012 2:30pm EST  --  Report as abuse
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