European shares buoyed by new Italian government
* FTSEurofirst 300 up 0.3 pct, Italy's MIB 1.5 pct higher
* Fund firm Aberdeen jumps on results
* Miners gain despite analyst caution on sector
By Tricia Wright
LONDON, April 29 (Reuters) - European shares rose on Monday, building on last week's steep advance, after the formation of an Italian coalition government ended two months of political uncertainty.
The FTSEurofirst 300 was up 0.3 percent at 1,199.80 by 0811 GMT, having jumped 3.7 percent last week as weak economic data including German business confidence fuelled expectations the European Central Bank will cut interest rates.
Italy's FTSE MIB added 1.5 percent after Italian centre-left politician Enrico Letta was sworn in as the country's new prime minister over the weekend.
"It's a positive development ... (but) I'm not constructive on European equities," said Michael Hewson, analyst at CMC Markets, citing a weak European economic outlook.
"While you could argue that Italy's got some scope to go up, that's only because it's been sold off."
Italian shares have underperformed since an inconclusive election in February that revived worries about economic reform in the indebted country. The MIB is up 1.8 percent year-to-date, while the FTSEurofirst300 is 5.5 percent higher.
Italian shares are among the cheapest stocks in Europe, with the broad MSCI Italy index trading at 9.4 times expected earnings for the next 12 months, while the STOXX Europe 600 trades at 12.3 times expected earnings.
British fund management firm Aberdeen Asset Management led risers, gaining 7.6 percent after unveiling a 25 percent jump in first-half revenues bolstered by strong demand for its higher-margin investment funds.
Miners bounced back after sharp falls in the previous session, shrugging off bearish analyst comment on the sector, which has slumped in recent weeks.
Credit Suisse, which is "underweight" commodity stocks, said that while the sector appears "oversold", it still may not be due a recovery.
Signs of a slowdown in economic growth in China, the world's top metals consumer, has led to a decline in the price of copper and gold over the last month, and this in turn has impacted mining and commodity stocks.
Nomura also maintains its cautious stance towards the metals and mining sector given its weaker view on China, but likes BHP Billiton and Rio Tinto.
Technical analysts said the Euro STOXX 50 - up 0.8 percent at 2,704.11, having last week broken above its 50-day moving average - was poised for continued gains, with Thursday's ECB's policy meeting likely to be a driver.
A Reuters poll of 76 economists showed a narrow majority of 43 expected a rate cut of 25 basis points, taking the ECB's main refinancing rate to a record low of 0.50 percent.
"I expect the first target (for the Euro STOXX 50) will be last weeks' high of 2,709, followed by 2,726 and 2,746 (previous levels of resistance)," Craig Erlam, analyst at Alpari, said.
"If we do see an ECB rate cut on Thursday, I see no reason why the index won't surpass this year's high (at 2,754)."
- U.S. war veteran released by North Korea returns home |
- South Korea to make announcement on air zone; expansion is anticipated |
- Pro-Europe protesters gather for rally in Kiev
- Pennsylvania newlyweds "just wanted to murder someone together:" police
- Obama defends interim Iran deal, seeks to assure Israel