* FTSEurofirst 300 up 9.33 points at 1,160.23
* Peugeot rallies on positive broker comment
* ECB rate decision due at 1145 GMT
* Investors eye dovish tone from Draghi
By David Brett
LONDON, July 4 European stocks rallied on
Thursday, erasing most of the losses accrued over the previous
two sessions, led by French carmaker Peugeot which won a rare
vote of confidence from a major broker.
Autos was by far the best performing sector in
Europe, leading the FTSEurofirst 300 up 9.33 points, or
0.8 percent, to 1,160.23.
The European index had fallen 1.1 percent since Tuesday on
concerns including Portugal's political crisis, which stoked
alarm about the country's previously dogged commitment to its
bailout programme and prompted the Financial Conduct Authority
to temporarily place short-selling bans on four Portuguese
PSA Peugeot Citroen surged 7.2 percent after
Goldman Sachs lifted its rating on the stock to 'buy' from
'neutral' and added it to its 'conviction list' with a share
price target of 9 euros, making it one of only two bullish
analyst recommendations among the 24 broker ratings on Peugeot
tracked by Thomson Reuters.
Goldman cited recent Reuters reports that the Peugeot family
might be willing to cede control of PSA as pointing to a
potential catalyst that might encourage the market to focus on a
sum of the parts valuation.
"We believe that a clear plan to restructure the business
would allow the market to revalue PSA's automotive business to
15 percent EV/sales (enterprise value-to-sales) from 3 percent
currently," Goldman Sachs said in a note.
Hedge funds have been betting against Peugeot's shares,
making it one of the biggest short-selling targets in Europe in
the past year. According to data from Markit, 10.2 percent of
Peugeot shares outstanding are out on loan.
With volatility - a crude gauge of investors fear -
up around 40 percent from levels in May, coinciding with a
market fall which was precipitated by worries over stimulus
measures being scaled back in the United States, investors will
be looking for soothing words and a dovish tone from European
Central Bank President Mario Draghi after the latest interest
rate decision due at 1145 GMT.
"We are reviewing our modest overweight to equities and
while the recent sell off in bonds was overdone, investors
should take it as a warning of the potential change in the
monetary regime," Chris Godding, managing director at Signia
Political unrest in Egypt and resurgent debt worries in both
Greece and Portugal have been unsettling European stocks.
Credit Suisse, however, said Europe is stronger now than it
was at the onset of previous crises.
"The market became complacent about the scale of leverage in
the periphery and overlooked the backtracking on banking reform
... However, we think it is very unlikely that the current
episode is going to lead to a 'Grexit'-type scare," its analysts