Unilever, China relief send European shares to 5-1/2 yr high

Tue Jan 21, 2014 7:08am EST

* FTSEurofirst 300 up 0.4 pct, Euro STOXX 50 up 0.5 pct

* Market relieved as China intervenes to ease credit squeeze

* Gloomy corporate updates temper optimism

* Unilever bucks trend with earnings beat

By Francesco Canepa

LONDON, Jan 21 (Reuters) - European shares rose to 5-1/2 year highs on Tuesday, boosted by gains in consumer goods group Unilever after strong results and by China's moves to defuse a cash squeeze.

Investor appetite, however, was tempered by disappointing corporate updates from beverage group SABMiller and French engineering firm Alstom, among other companies.

Unilever rose nearly 4 percent after reporting better-than-expected 2013 results on Tuesday, with an improved performance in emerging markets.

The company, which generates more than half of its sales in emerging economies, had been hit hard by slower economies and weaker currencies in many of its markets in the third quarter.

"Unilever struggled in the third quarter so there may be a one-off element in that there were some sales that were delayed and came through in the fourth quarter," Nomura analyst David Hayes said. "But you've got to give them credit because they really seem to have stepped up to the mark in a difficult environment."

The stock was among the best performers in the pan-European FTSEurofirst 300 index, which was up 0.4 percent at 1,348.85 points, a level not seen since May 2008, at 1139 GMT.

The euro zone's blue-chip Euro STOXX 50 was up 0.5 percent at 3,167.49 points.

Investors welcomed a move by the People's Bank of China to inject 255 billion yuan ($42 billion) into financial markets to ease concerns about a credit crunch that could hamper growth in the world's No.2 economy.

"People don't want to see instability in China," Grant Lewis, head of research at Daiwa Capital Markets, said.

"If (Chinese authorities) want to move forward in terms of liberalisations you are going to have this kind of volatility in money rates but they do seem to be doing what they can."

Waning economic momentum in China, which is revamping its growth model by embracing greater transparency and higher-quality development, has been hitting earnings in Europe.

French spirits group Remy Cointreau said on Tuesday its sales contracted more than feared in the third quarter as a Chinese government crackdown on corruption caused once free-wheeling spenders to drink less premium cognac.

Larger rival SABMiller, the world's No. 2 brewer, saw its stock fall 0.9 percent on Tuesday after it reported disappointing third-quarter sales, hurt by weaker beer volume.

Adding to a gloomy earnings picture for the broader market, Dutch food and chemicals group DSM fell short of its full-year earnings target and French engineering firm Alstom lowered its annual objectives, sending the stocks down 10 percent and 11 percent, respectively.

Companies in the STOXX Europe 600 are seen missing consensus expectations by 1.3 percent in the latest quarter, according to StarMine's SmartEstimates, which focus on the up-to-date predictions form historically most accurate analysts.

Today's European research round-up

Europe indexes in 2014:

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