France leads European shares towards 3rd straight week of gains

Fri Feb 21, 2014 10:26am EST

* FTSEurofirst up 0.3 pct, CAC hits highest since 2008

* Technip, Saint-Gobain enjoy upgrades following results

* French index reverses last year's underperformance

* Vodafone adds most points after Verizon deal completed

By Alistair Smout

LONDON, Feb 21 (Reuters) - France's CAC 40 index hit a 5-1/2-year peak to lead European shares higher on Friday, with an index of top shares in the region set for its third straight week of gains.

French-listed oil services group Technip and construction firm Saint-Gobain rose 3.4 percent and 2.9 percent respectively, buoyed as banks lifted their target prices for the stocks after they reported results earlier in the week.

Saint-Gobain is now up 4 percent since reporting a sales and profit drop on Wednesday, with Berenberg describing the results as "solid" and the outlook as optimistic.

That continued a recent trend of French companies delivering decent profits and better outlooks, in contrast to last year, when a weak economy hit earnings and caused the CAC to underperform.

Of French blue chips to report yearly earnings so far, 60 percent have beaten or met expectations, posting an aggregate 2 percent surprise on earnings estimates.

On the STOXX Europe 600, there has been only a 1 percent positive aggregate surprise in earnings reports, with 59 percent of companies having beaten or met expectations.

"Many are calling the French economy the sick man of Europe, but people are buying the future. France has so much potential to improve," Markus Huber, senior sales trader at Peregrine & Black, said.

"The problems they're having are already so well known and are in the price, and there's a lot of scope for positive surprises, and little scope for negative surprise."

The CAC is up 1.8 percent so far this year, compared to a 0.8 percent rise on the German DAX. Last year, the DAX rose 25 percent to the CAC's 17 percent gain.

At 1502 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,342.55 points, led by a 0.5 percent rise on the CAC, hitting its highest since 2008.

Outside of the French index, Vodafone gained 2.5 percent as it completed the sale of its stake in Verizon Wireless to U.S. peer Verizon, contributing the most points to the index's advance.

The deal tees up an $84 billion payout in cash and shares at the end of February, which many may look to reinvest in stocks like Vodafone, analysts said.

"Certainly holders of Vodafone tend to be institutional and will play the re-weight somewhat by the book. Re-investment back into the Vodafone stub itself is certainly occurring apace," Monument Securities director Andy Ash said.

The FTSEurofirst 300 was set for its third straight week of gains, and investors remained positive on European stocks, with figures showing further brisk inflows into the region.

A poll by Thomson Reuters Lipper of 102 U.S.-based funds invested in European equities showed they added $502 million into European equities in the seven-day period to Feb. 19, a 34th straight week of net inflows - marking the longest streak of weekly inflows since Lipper started to monitor flows in 1992.

Europe bourses in 2014:

Asset performance in 2014:

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