Europe shares regain ground as Ukraine tensions ease

Tue Mar 4, 2014 10:41am EST

* FTSEurofirst 300 up 1.7 pct, Euro STOXX 50 up 2.3 pct

* Blue-chips with big Russia exposure bounce back

* Europe's corporate earnings recovery seen intact

By Blaise Robinson

PARIS, March 4 (Reuters) - European stocks rose on Tuesday, reversing a big portion of the previous session's sharp sell-off after Russian President Vladimir Putin said he would only use force in neighbouring Ukraine as a last resort.

Putin's first comments on the crisis sought to ease East-West tension and fears of war in the former Soviet republic and helped fuel a rebound in equities worldwide. Markets had earlier been cheered when Putin ordered an end to large-scale military exercises near Russia's border with Ukraine.

European blue-chip shares with the biggest exposure to Russia were among top gainers after being hammered on Monday.

Finnish tyre maker Nokian Renkaat rose 3.5 percent, Austrian lender Raiffeisen Bank International gained 5.5 percent and Danish brewer Carlsberg was 2 percent higher.

The three companies derive respectively 26 percent, 22 percent and 17 percent of their overall revenues from Russia, according to data from MSCI.

"Putin has managed to calm down markets, but on the ground, nothing has really changed. Investors are a bit complacent to buy the dip with such appetite," said Alexandre Baradez, chief market analyst at IG France.

"A number of U.S. and European indexes are close to record highs, which makes the market most vulnerable to negative catalysts."

At 1507 GMT, the FTSEurofirst 300 index of top European shares was up 1.7 percent at 1,341.30 points, while the euro zone's blue-chip Euro STOXX 50 index was up 2.3 percent at 3,125.40 points.

The two benchmark indexes tumbled 2.2 and 3 percent respectively on Monday after Russian troops seized control of key locations in Ukraine's region of Crimea.

European shares had gained about 7 percent from a low point in February - with key national indexes such as Germany's DAX and UK's FTSE 100 flirting with record highs - boosted by signs of an economic recovery in the euro zone and a string of better-than-expected corporate results.

With Europe's earnings season drawing to an end, 56 percent of companies have posted earnings that have met or beaten analyst expectations, according to Thomson Reuters StarMine.

Scott Meech, co-head of European equities at Union Bancaire Privee, said the backdrop of a gradual recovery in European company earnings and the European economy remained intact, in spite of the hit to markets from tensions in Ukraine.

"The fundamentals are still pretty good, and I think the right instinct is to buy any weakness in the market," he said.

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