Chip-makers help European shares rebound
* FTSEurofirst 300 rises 0.3 percent
* QE fears eased but trade cautious
* STMicroelectronics gains on good outlook
* UBS ups STOXX Europe 600 target
LONDON, June 4 (Reuters) - European shares rose on Tuesday as chip-makers gained on a confident growth outlook from STMicroelectronics, while investors also took a recent pullback as an opportunity for some cautious buying.
The pan-European FTSEurofirst provisionally closed 0.3 percent higher at 1,211.34, having dropped 4 percent since May 23 after minutes showed the U.S. Federal Reserve had discussed slowing its open-ended monetary stimulus package.
"I'm firmly in the camp that the Fed aren't about to pull away from QE (quantitative easing) any time soon, so any pullback in the market will see buyers come in and try to latch on to this rally that they've missed so far," said Joe Rundle, head of trading at ETX Capital.
Data on Tuesday showed that the U.S. trade deficit had widened, potentially strengthening the case for those expecting stimulus to continue, although volumes well below the 90-day average across European stocks suggested that investors were making the trade only tentatively.
"Bad is good and good is bad on the data front, and we're going to see a period of increased volatility... There'll be an upward, albeit choppy, trend, which is one for a brave investor," Rundle said.
STMicroelectronics rose 4.5 percent to top the FTSEEurofirst 300 gainers, and peer Infineon climbed 1.8 percent after STM's chief executive, Carlo Bozotti, told the newspaper Le Figaro that the company expected growth of 5 to 10 percent this year.
The top faller was Wolseley, which slumped 6.3 percent, after the highly valued stock reported third-quarter results below expectations.
The pan-European FTSEurofirst opened lower but held above its 50-day moving average at 1,204.92, with the Euro STOXX 50 finding support above 2,746, the March high it managed to close above in the previous session.
Despite the recent correction, UBS saw further upside to the market, raising its target price on the STOXX Europe 600 , which currently trades at 299.62, to 325 from 290.
"We suspect the current pull-back in equities is driven by the speed of the move in bond yields - US yields are up 50 bps (basis points) in four weeks. The good news is bond yields are rising because of higher growth, not higher inflation," analysts at UBS said in a note.
"A gradual (growth-driven) rise in bond yields from these low levels likely means higher, not lower (valuations)."