European shares stabilise after Portugal-led rout

EDINBURGH, July 11 Fri Jul 11, 2014 3:17am EDT

EDINBURGH, July 11 (Reuters) - European shares edged higher on Friday, stabilising after steep falls in the previous session but with sentiment still cautious as Portugal's biggest bank attempted to reassure investors after trading in its shares was suspended.

Portugal's PSI share index was up 0.5 percent in early deals, after falling 4.2 percent to a nine-month low on Thursday, with other indexes firming up across the region.

"The question on investors' minds is whether this latest Portugal banking crisis will lead to contagion in the region," Stan Shamu, market strategist at IG, said. "The market doesn't quite feel this is the case."

The fall in the previous session came after shares and bonds of Espirito Santo Financial Group, the chief shareholder in Banco Espirito Santo, were suspended over "material difficulties" at parent firm ESI.

On Thursday Banco Espirito Santo said losses associated with the founding family would not affect the bank. Both Banco Espirito Santo and Espirito Santo Financial Group failed to open on Friday.

Hopes that losses would be contained allowed a small relief rally in other European stocks, with the FTSEurofirst 300 up 0.3 percent to 1,353.41 in early deals. (Reporting by Alistair Smout; Editing by Lionel Laurent)

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