European shares hit fresh peaks as StanChart rises
* FTSEurofirst 300 up 1.1 pct, at fresh 2-year high
* STOXX Europe 600 at highest level since mid-2008
* Standard Chartered rises after record profits
* Central bank measures seen to continue to support equities
By Sudip Kar-Gupta
LONDON, March 5 (Reuters) - Major European equity indexes rose to fresh highs on Tuesday, buoyed by financial stocks and expectations that central banks will sustain stimulus measures to support the global economy.
The pan-European FTSEurofirst 300 index rose 1.1 percent to 1,181.58 points to mark a fresh two-year high by around midday.
The euro zone's blue-chip Euro STOXX 50 index also advanced 1.4 percent to 2,655.05 points while the broader STOXX Europe 600 index rose 1.3 percent to 292.55 points, its highest level since mid-2008.
British-listed bank Standard Chartered rose 2.8 percent to add the most points to the FTSEurofirst 300 index after it reported record profits.
"Standard Chartered and its rival HSBC have extremely strong franchises," said Cyrille Urfer, who heads up asset allocation at Swiss bank Gonet.
Urfer said around 20 percent of his European equity portfolio was invested in northern European financial stocks, which often outperform when stock markets rise.
Urfer said his firm had "very little" exposure to shares in Spain and Italy, whose markets have been hit hard by the euro zone's sovereign debt crisis and Italy's political deadlock.
However, he said plans by the U.S. Federal Reserve and European Central Bank (ECB) to inject fresh liquidity to lift the economy would continue to support stock markets.
Equities currently offer better returns than cash or bonds, whose returns reflect the decision by major world central banks to hold interest rates near record lows.
"This re-allocation process (from bonds to shares) will continue to be an extremely strong support for equity markets," he said.
LIMITED NEAR-TERM GAINS?
Urfer said he would not be significantly adding to his equity position at present, given the Italian election stalemate.
Berkeley Futures associate director Richard Griffiths said equity markets may struggle to rise much higher in the near term.
He added that clients had been selling "call" options - which bet on a future market rise - on the German DAX and Euro STOXX to get some protection in case the equity market rally petered out in the near term.
Griffiths said clients were selling "call" options due to mature in 2-3 months on the DAX with a strike price of around 8,000 points, as well as selling "calls" on the Euro STOXX 50 with a strike price of 2,750 points.
This implies that many investors do not expect those two indexes to rise by more than 3 percent by April or May.
"It's difficult to see the market rallying hugely from here. Any moves up from here will be sluggish," he said.
MB Capital trading director Marcus Bullus expected equity markets to hold around these levels, and for bargain-hunters to use days when the market fell to buy shares on the cheap, which would prevent any major stock market pull-back.
"Whenever the market falls, the bargain-hunters come straight back in," he said.
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