Fed stimulus defence underpins European equities
* FTSEurofirst 300 up 0.1 percent
* Bouygues top riser post results
* Charles Stanley targets drop to 2,500 for Euro STOXX 50
By Tricia Wright
LONDON, Feb 27 (Reuters) - European shares opened up on Wednesday, clawing back some of the previous session's sharp losses, helped by the U.S. Federal Reserve's defence of its asset-buying programme, though jitters over the euro zone might cap gains.
Fed Chairman Ben Bernanke strongly defended the U.S. central bank's monetary stimulus on Tuesday, which eased worries over a possible early retreat from bond purchases, and made for a firmer close on Wall Street.
The FTSEurofirst 300 was up 0.1 percent at 1,151.62 by 0901 GMT, buoyed by banks, big fallers on Tuesday when the broader index dropped 1.4 percent after an Italian election stalemate revived worries about the future of the euro zone.
The euro zone's blue-chip Euro STOXX 50 index firmed 0.3 percent to 2,577.99, having sunk 3.1 percent to three month lows on Tuesday, extending its retreat from an 18-month high of 2,754.80 points hit at the end of January.
"After the Italian election results it seems that rallies might well be sold from here on," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million assets.
Bouygues was the top riser on the FTSEurofirst 300, ahead 7.6 percent, after the French construction-to-media conglomerate unveiled a 3 percent rise in full-year sales, whilst maintaining its dividend.
Airbus parent EADS was another strong gainer, up 5.7 percent, as it predicted higher profit this year on the heels of stronger than expected 2012 earnings and a clampdown on costs.
Charts painted a gloomy picture. Charles Stanley technical analyst Bill McNamara highlighted that the Euro STOXX 50 has entered a new volatile phase, with the drop from Monday's peak to Tuesday's closing low a hefty 4.8 percent.
"A bounce today looks likely but this rising volatility does look like it could lead to lower prices in the medium-term, with 2,500 a realistic downside target," he said.
However, both the Euro STOXX 50 and the FTSEurofirst 300 index are 20-25 percent above their 2012 lows, since a pledge last year by the European Central Bank (ECB) to protect the euro currency from the area's debt crisis did much to bolster investor confidence in the region.
BCA Research wrote in a note that the full-year outlook for global equities remained positive, given the backdrop of a gradual improvement in the world economy and the fact that equities offer more than cash or bonds, where returns have been hit by record low interest rates.
"This creates a 'sweet spot' for equity investors - modest growth, low inflation and negative real rates will support corporate earnings and embolden risk taking," wrote BCA Research.
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