Euro zone shares rebound after Spanish, Italian debt sales

Wed Oct 9, 2013 11:15am EDT

* Euro STOXX 50 up 0.5 pct, FTSEurofirst 300 down 0.2 pct
    * Euro zone banks, Italian and Spanish stocks lead rebound
    * Volatility rises as investors hedge against U.S. default
jitters

    By Francesco Canepa
    LONDON, Oct 9 (Reuters) - Euro zone shares rebounded on
Wednesday, outpacing their British and Swiss counterparts as
successful debt sales in Rome and Madrid boosted banks and
stocks on the region's periphery.
    Spanish and Italian stocks rallied after the countries'
sovereign bonds sold well, adding to signs of improved sentiment
towards the euro zone's struggling southern economies.
    Italy's FTSE MIB index and Spain's Ibex 
rose 1 percent and 1.4 percent, respectively, outperforming
Switzerland's SMI and Britain's FTSE 100 indexes, down
0.8 percent and 0.4 percent. 
    Euro zone banks, which are exposed to the region's
sovereign debt through their bond holdings and rely on economic
growth for their core business, rose 1.6 percent, led by Italy's
Banco Popolare and Spain's Caixabank.
    Italian and Spanish shares have outpaced their European
peers since July as better economic data lured investors to
stocks trading at lower valuation multiples, including banks,
telecoms and utility stocks in the periphery.
    The recent rally, however, has made those valuations start
to look full, especially in Spain. 
    
    "The outperformance of value stocks is a long-term theme but
there is scope for some short-term profit taking into the end of
the year," Claudia Panseri, global equity strategist at Societe
Generale Private Banking.
    "The fact that the euro zone has climbed out of recession is
in the prices by now and we're waiting to see an expansion in
earnings."
    Panseri has a 3,000 point year-end target for the euro zone
Euro STOXX 50 index, which was up 0.5 percent at
2,918.02 points by 1444 GMT.
    The pan-European FTSEurofirst 300 index was down
0.2 percent at 1,228.34 points, a fresh one-month low, weighed
down by defensive stocks such as Swiss pharma group Roche
 and food group Nestle.
    Lack of progress in resolving the U.S. fiscal deadlock kept
sentiment subdued and boosted the Euro STOXX volatility index
, which gauges the cost of insuring against future market
swings using options, to a one-month high. 
    President Barack Obama said he would only negotiate with
Republicans once they agreed to re-open a government in its
second week of shutdown, and raise the debt ceiling with no
conditions. 
     In this context, investors welcomed news that Janet Yellen
will take over as Federal Reserve chairman from next year, which
bolstered expectations the U.S. central bank will tread
carefully in unwinding equity-friendly stimulus. 
     "It's the Yellen effect that has brought financial market
stabilisation," said Oliver Roth, head trader at Close Brothers
Seydler.