European shares steady as Chinese data underpins growth optimism

Mon Dec 9, 2013 11:50am EST

* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 up 0.3 pct

* China data helps stocks sustain rally after U.S. jobs beat

By Francesco Canepa

LONDON, Dec 9 (Reuters) - European shares steadied on Monday, consolidating gains from the previous session as Chinese export data encouraged investors to anticipate stronger global growth.

China's exports handily beat forecasts in November and an unexpected drop in consumer inflation eased fears of any imminent policy tightening, helping to sustain a rally in global shares which had been fuelled by estimate-beating jobs data from the United States on Friday.

"This is the first synchronised global recovery since 2010," said Nigel Bolton, head of European equities at the BlackRock Investment Institute.

"We do believe equity markets can continue to rise further into 2014 (although) I suspect it would be at a slower pace than 2013."

The pan-European FTSEurofirst 300 was up 0.1 percent at 1,271.90 points and the euro zone Euro STOXX 50 was up 0.3 percent at 2,987.29 points at 1608 GMT.

Spanish infrastructure company Ferrovial rose 3.5 percent to the top of the FTSEurofirst 300, extending gains after saying its British subsidiary Amey had won a five-year, 130-million-pound ($213 million) contract to maintain 10,000 kilometres (6,200 miles) of roads in Britain.

Shares in Tullow Oil bucked the trend, falling 3.4 percent to the bottom of the FTSEurofirst 300, after the explorer said the Tultule well it drilled in Ethiopia had failed to find oil.

The broader STOXX Europe 600 has rallied 12.5 percent this year despite falling profits estimates, leaving it trading at 13.5 times its expected earnings for the next 12 months, against its 10-year average of 12 times, Thomson Reuters Datastream showed.

"The bigger danger in my mind is that the economy just does not recover to the extent that we are anticipating," said BlackRock's Bolton, who expected European earnings per share to rise around 10 percent next year.

"If we don't get that, there's a reasonable amount priced into the market for earnings growth next year ... so you'll probably see the market will have to correct."

Curbing market gains were lingering concerns that stronger economic data will encourage the United States to advance a cut to its asset purchase programme, which has driven money out of cash and safer bonds into higher-yielding stocks.

A Reuters poll conducted after the U.S. payrolls data were released showed more U.S. primary dealers expect the Fed to start to taper its purchases in March, or sooner.

Uncertainty over when the process will begin and what it might mean for equities are likely to keep a lid on markets into year's end, even though Friday's data suggested the economy was recovering well enough to cope with a Fed move.

"Against the backdrop of decent growth, strong unemployment, it's not such a bad thing," said Mouhammed Choukeir, chief investment officer at Kleinwort Benson, reiterating his positive stance on European equities.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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