Lisbon rallies as European shares edge higher

Wed Jul 23, 2014 12:56pm EDT

* FTSEurofirst 300 closes up 0.1 pct at 1,375.69 points

* Lisbon's PSI-20 equity index outperforms with 1.7 pct rise

* PSI-20 lifted as investors take stake in BES

* Akzo rises after forecast-beating results

* Investors keeping wary eye on Ukraine crisis

By Sudip Kar-Gupta

LONDON, July 23 (Reuters) - Portugal's stock market outperformed other European bourses on Wednesday, rallying after investors bought stakes in the country's troubled lender Banco Espirito Santo.

Lisbon's benchmark PSI-20 equity index rose 1.7 percent, beating the 0.2 percent gains on the benchmark German and French markets, as investors took heart from late Tuesday news that two major U.S. institutions now held a combined 5 percent interest in BES.

BES has been hit by concerns about its exposure to the debts of its founding family, but the arrival of new investors sent shares in BES up by 14.4 percent.

The pan-European FTSEurofirst 300 index, which touched six-and-a-half year highs in June and early July, closed up by 0.1 percent at 1,375.69 points.

The FTSEurofirst 300 has retreated over the last week after a Malaysian passenger plane was shot down on July 17 over rebel-held territory in eastern Ukraine, where Kiev is struggling to quell a pro-Russian separatist rebellion, killing 298 people.

Western powers have accused pro-Russia rebels of having shot down the plane by mistake, and the European Union has raised the prospect of restricting Russian access to European capital markets, defence and energy technology.

However, stock markets have not sold off too aggressively in the wake of the crisis between Ukraine and Russia.

Andrew Arbuthnott, head of large-cap European equities at Pioneer Investments, said that while uncertainty over Ukraine could result in more stock market volatility, equities should still offer good returns for investors this year.

"Overall, we believe 2014 can be another positive total return year for the European market, but the volatility associated with those market returns from here is likely to be higher," he said.

Akzo Nobel rose 3.9 percent after the chemicals group reported higher-than-expected second quarter earnings, and Akzo's gains drove up shares in rival Bayer by 0.5 percent.

"The results season so far has not been too bad," said Mirabaud Securities' European equity sales executive Rupert Baker.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (additional reporting by Alistair Smout; Editing by Gareth Jones)

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