European cyclical shares rally on earnings, data

Thu Aug 1, 2013 4:47am EDT

* FTSEurofirst 300 index rises 0.4 percent

* Cyclical shares rally on results, China data

* Societe Generale surges 7 pct as profits double

By Atul Prakash

LONDON, Aug 1 (Reuters) - European cyclical equities, especially miners and banks, rose on Thursday on the back of encouraging Chinese manufacturing data, some strong earnings and the U.S. Federal Reserve's indication of no immediate cut in stimulus.

The STOXX Europe 600 Basic Resources index climbed 1 percent to feature among the top gainers after a report showed growth in the manufacturing sector in China, the world's biggest metals consumer, picked up slightly last month.

"Encouraging China data, which came after the government recently set a floor for economic growth, is positive for the mining sector and could improve confidence and investment in the country," said Tom Robertson, senior trader at Accendo Markets.

"The Fed's confirmation of what was being anticipated by the market has also eased some nerves," he said, referring to the U.S. central bank that showed no signs late on Wednesday of cutting the economic stimulus that has broadly helped miners.

Despite the relatively upbeat official Chinese PMI data, a rival report from HSBC was much more gloomy, showing activity in the world's second biggest economy fell to its lowest level in nearly a year.

European banks, up 1 percent, advanced on positive corporate news. Societe Generale jumped 7 percent after its second-quarter earnings more than doubled.

Denmark's biggest financial institution, Danske Bank , was up 6.2 percent after reporting a stronger-than-expected second quarter earnings report, while Lloyds rose 6 percent as it expected to meet margins and cost savings targets earlier than expected.

"Lloyds has blown away some investment cobwebs as it posted a set of numbers which have beaten expectations on most counts. The company continues to target cost reductions and the sale of non-core assets, whilst also improving operating interest margins and general impairment provisions," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

MIXED EARNINGS RESULTS

Thursday's earnings results were mixed, with some major companies disappointing. Issues such as rising costs and a surge in oil thefts in Nigeria hit Royal Dutch Shell's profits, dragging down its shares by 4.2 percent.

Temporary power provider Aggreko fell 6.8 percent after saying that trading at its power projects business was subdued in the six months to June 30.

According to Thomson Reuters StarMine data, half of the STOXX Europe 600 companies have reported second-quarter results so far, of which 54 percent have met or beaten profit forecasts, while the rest have missed.

At 0824 GMT, the FTSEurofirst 300 index was 0.4 percent higher at 1,213.07 points. The index was on track to record its best monthly gain since June 2012, having bounced nearly 10 percent from a low of 1,111.11 in late June.

Investors awaited policy meetings of the European Central Bank and the Bank of England later in the day for hints about their stimulus programmes. However, the central banks are expected to keep rates intact.

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