* FTSEurofirst 300 ends up 0.7 pct at 1,184.36 points
* Euro STOXX 50 closes up 1.3 pct at 2,702.69 points
* Telefonica merger speculation lifts telecoms sector
* Some traders unconvinced by market rebound
* Markets may be range-bound in near term
By Sudip Kar-Gupta
LONDON, June 17 European shares recovered on
Monday as talk of takeover activity in the telecoms sector
helped stock markets claw back losses suffered last week.
However, some traders expected European equities to be stuck
in a relatively tight range in the near term while uncertainty
persists over the future monetary policy of major central banks
including the U.S. Federal Reserve.
The pan-European FTSEurofirst 300 index closed up
0.7 percent at 1,184.36 points, while the euro zone's blue-chip
Euro STOXX 50 index rose 1.3 percent to end at
The STOXX Europe 600 Telecoms Index was the
best-performing sector, jumping 1.6 percent after speculation
that AT&T was interested in Spain's Telefonica.
Telefonica said AT&T had not shown any interest.
Telefonica rose 2.4 percent while UK peer Vodafone,
whose Verizon Wireless venture has also been subject to
bid speculation, rose 1.5 percent, with Telefonica and Vodafone
together adding the most points to the FTSEurofirst 300.
Despite the market recovery, Logic Investments' strategy
head Peter Rice said the rebound did not look wholly convincing,
with the FTSEurofirst 300 still down some 6 percent from a 5-1/2
year peak of 1,258.09 points struck in late May.
"The rallies look corrective in nature. We don't see any new
money participating in it. We're still a good way off the May
highs and we still look stuck in a range. If anything, the risk
still remains to the downside," said Rice.
FED TAPERING WORRIES
The FTSEurofirst 300 has gained 5 percent since the start of
2013 and the Euro STOXX 50 is up 3 percent.
World stock markets fell from multi-year highs over the last
three weeks as speculation built up that the Federal Reserve may
soon taper economic stimulus measures that have contributed to
the global equity rally.
Some investors added to equity positions on Friday and
Monday on expectations that a Fed meeting this week will
reinforce its commitment to helping the U.S. economy.
"Expectations had swung aggressively in a hawkish direction
over the last couple of weeks. But there is definitely a bit of
a shift going on in the market as people are anticipating
somewhat dovish rhetoric from Bernanke," said Macquarie
strategist Daniel McCormack.
Others were more cautious.
Darren Courtney-Cook, head of trading at Central Markets
Investment Management, said there was a still a chance that
investors would use worries about the Fed's future policy to
sell shares and book profits on the equity market rally.
However, he expected that any weakness over the coming two
months would be followed by renewed gains for equities, which
still offer better returns than bonds, which have been hit by
injections of liquidity and interest rate cuts by central banks.
"I think there may be a wash-out over the summer and then
people will buy back into the market after the summer and into
the year-end," he said.