UPDATE 1-Data boost helps Spain outpace weak European shares

Mon Jan 6, 2014 12:34pm EST

* Spain's Ibex 35 rises 0.9 pct after strong data
    * Sustainable recovery to boost Spanish stocks - Deutsche
Bank
    * FTSEurofirst 300 down 0.2 pct as China, U.S. data caps
appetite


    By Francesco Canepa
    LONDON, Jan 6 (Reuters) - Spanish stocks outpaced a
lacklustre broader European market on Monday after strong
economic data fuelled expectations of an economic recovery in
the country and revived interest in stocks on the euro zone
periphery.
    Spain's IBEX index rose 0.9 percent after data
showed the country's service sector grew at its fastest pace in
6-1/2 years. Most other European shares markets dipped.
 
    Domestically focused lenders Banco Popular and
Banco de Sabadell, which stand to benefit from
improving economic conditions in Spain, were among top gainers,
surging 7 percent and 4 percent, respectively.
    Upbeat data has helped the broader MSCI Spain index rise
some 30 percent over the past six months, making it the best
performer among major European indexes, Datastream data showed.
    "We think this is really the start of the improvement in
data and we see (it) as a sustainable story," said Gareth Evans,
a strategist at Deutsche Bank.
    He expected Spanish and Italian stocks to outperform a 14
percent rise in the broader STOXX Europe 600 index this
year.
    Italy's FTSE MIB rose 0.6 percent on Monday as a
poll of the country's services sector activity showed the pace
of contraction eased in December. 
    Even after their recent rebound, Spanish and Italian stocks
offer more attractive valuations than their peers in the core
countries of Germany and France.
    MSCI's indexes of Spanish and Italian shares respectively
trade at a 30 percent and a 50 percent discount to the MSCI
Europe based on their price/book value ratios, Datastream data
showed, a steeper discount than the indexes' 10-year averages.
    "I'm overweight on the periphery, as opposed to France and
Germany," Clairinvest fund manager Ion-Marc Valahu said.
"There's still some value there."
    The broader FTSEurofirst 300 index of pan-European
shares fell 0.2 percent to 1,309.24 points, with the euro zone's
Euro STOXX 50 also down 0.2 percent at 3,069.16
points.
    Trading volume on the FTSEurofirst 300 was 25 percent lower
than the index's average for the past three months, with many
traders away and some exchanges closed for the Epiphany holiday.
    The indexes sold off in late trade, with weak Chinese and
U.S. data curbing appetite for global equities after a bumper
2013.  
    The FTSEurofirst 300 rose 16 percent in 2013 for its best
annual gain since 2009, while the Euro STOXX 50 index rose 18
percent.
    Darren Courtney-Cook, head of trading at Central Markets
Investment Management, said there may be some short-term
pull-back on the European stock markets later this month as
investors look to cash in gains.
    He felt the Euro STOXX 50 could fall to 2,950 points over
the next two weeks, but that traders should use any such
weakness to buy up stocks.
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