* Euro STOXX 50 hits fresh 2-year highs
* Euro STOXX 50 and FTSEurofirst 300 up 0.1 pct
* Utilities and ARM lead market higher
By Sudip Kar-Gupta
LONDON, Sept 11 A key European equity index
scaled fresh two-year highs on Wednesday, lifted by a rebound in
beaten-down utility stocks and a surge in chip designer ARM
Traders also said increasing signs that Europe's economy was
recovering from the region's euro zone sovereign debt crisis
would enable equities to maintain a longer-term upwards trend,
even if markets wobbled in September due to the prospect of less
economic stimulus measures in the United States.
Geopolitical risk also eased after U.S. President Barack
Obama said late on Tuesday that Russia's offer to push Syrian
President Bashar al-Assad to put chemical weapons under
international control could potentially head off the type of
limited military action he was considering.
The euro zone's blue-chip Euro STOXX 50 index
rose 0.1 percent to 2,852.95 points, having earlier hit an
intraday peak of 2,863.95 points which marked its highest level
since mid-July 2011.
The broader FTSEurofirst 300 index also rose 0.1
percent to 1,244.19 points, putting it back within touching
distance of a 5-year high of 1,258.09 points reached in May.
The U.S. Federal Reserve is expected to start reducing a
bond-buying programme that has led much of this year's global
equities rally at a meeting next week.
However, worries about the possible hit this could have on
European equity markets have been offset by signs of economic
growth in Germany and other major European countries.
A Reuters poll on Wednesday showed those surveyed felt
Europe's economic recovery was here to stay.
"Eurozone firms are more optimistic than they have been for
18 months. The Markit purchasing managers' index rose from 48.7
to 50.5 points, taking it above the threshold marking growth.
This should point to an uptick in earnings," said Phil Dicken,
head of European equities at Threadneedle Investments.
The STOXX Europe 600 Utilities Index, which has
underperformed the broader market rally this year, rose 1.7
percent to make it the best-performing equity sector on
ARM also gave the market a lift with a 4.1 percent rise
after U.S group Apple unveiled a new mobile phone using
ARM's latest technology.
Rupert Baker, a European equity sales executive at Mirabaud
Securities, said growing signs of a broader European economic
recovery were drawing investors back into beaten-down stocks
such as utilities.
In spite of Wednesday's rise, the European utility sector
has only risen 4 percent since the start of 2013 - less than an
11 percent gain on the broader pan-European STOXX 600 index
According to Thomson Reuters StarMine data, European utility
stocks trade on average at an estimated price-to-earnings (PE)
ratio for next year of 11.8 - a cheaper valuation than a
corresponding P/E ratio of 13 for the pan-European STOXX 600
The utility sector also has an average dividend yield of 5.7
percent, offering better returns than an average dividend yield
of 3.3 for the STOXX 600, according to StarMine.
"It's the value boys and the recovery boys who have got the
market at the moment. The whole of last month's rally has been
built on recovery stocks such as the utilities, where the
dividend yields are still secure," said Baker.