European shares steady by midday, miners surge

Thu Jan 16, 2014 7:17am EST

* FTSEurofirst 300 index steadies

* Miners jump on positive market outlook

* Charts see 90 points gain for Euro STOXX 50

By Atul Prakash

LONDON, Jan 16 (Reuters) - European equities steadied just below a 5-1/2-year high by midday trading on Thursday, with mining shares boosted by output data and broker comments offsetting losses in retail and technology stocks.

The STOXX Europe 600 basic resources index rose 2.4 percent to the top of the sectoral gainers' list. A sharp rise in output helped Rio Tinto rise 3.4 percent and research notes helped BHP Billiton and Polymetal advance 3.8 percent and 5.8 percent.

A Citigroup note said it changed its 12-month sector stance to "bullish" from "neutral" to reflect better fundamentals, naming BHP and Rio among its key picks. Polymetal was helped by an upgrade from UBS to "buy" from "neutral".

At 1127 GMT, the pan-European FTSEurofirst 300 index was down 0.05 percent at 1,339.10 points after climbing 1 percent to a 5-1/2-year high on Wednesday on encouraging U.S. data and strong results from companies such as Bank of America .

Fundamental and technical analysts remained positive on the market's outlook, saying an improving economic outlook and encouraging earnings would continue to support the market.

"So far, about two-thirds of the U.S. companies have beaten their revenue forecasts. The results are fairly good so far and fuel expectations that the fourth quarter reporting season in Europe would also bolster the positive market trend," Christian Stocker, equity strategist at UniCredit in Munich, said.

Charts also suggested that recent price action had been positive for the market and that the euro zone's blue-chip Euro STOXX 50 index was poised to rise again in the near-term. The index was down 0.3 percent at 3,159.45 points after hitting a new five-year high earlier in the session.

"The index is showing a bullish consolidation pattern, suggesting an upside potential of 90 points. The trend is definitely up and I am looking for a rally to around 3,200-3,220 in the near term," Roelof-Jan van den Akker, senior technical analyst at ING Commercial Banking, said.

However, gains in mining shares were eclipsed by losses in some other sectors, with the retail index falling 0.9 percent on disappointing company updates. Ahold fell 3.1 percent on a steeper-than-expected fall in fourth-quarter sales and Dixons, Europe's No. 2 electricals retailer, dropped 5 percent after cautioning on growth.

"The retail sector is under pressure due to some disappointing comments ... It is clear that the austerity in the euro zone has hurt the sector," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

"However, as the economy is on the mend and we are likely to see some decent growth in the world economy, things should pick up in 2014."

Telecom shares fell 0.7 percent, with TeliaSonera dropping 1.3 percent after saying its fourth-quarter profit will be weighed down by one-off items totalling 2.5 billion Swedish crowns ($386 million).