* Euro STOXX 50 up 0.7 pct
* Index on course for year's biggest two-day gain
* Investors buy market dips on ECB stimulus bet
* Steelmakers boosted by UBS upgrade
By Francesco Canepa
LONDON, Aug 26 Euro zone blue chips were on
track to record their best two-day gain this year on Tuesday,
boosted by the prospect of further stimulus from the European
Central Bank (ECB) and by strong gains for some steelmakers.
The euro zone's Euro STOXX 50 index was up 0.7
percent at 3,188.18 points by 1441 GMT, setting it on course for
its biggest two-day rise since December 2013 at 2.9 percent.
Shares on both sides of the Atlantic have been boosted by
comments from ECB President Mario Draghi, who was seen as having
opened the door to a large-scale asset-buying scheme known as
quantitative easing, or QE, to pump cash into the financial
system and revive inflation.
"Draghi's readiness to do more is providing the necessary
boost for equity indexes," Ashraf Laidi, chief global strategist
at City Index, said.
"Buying on the dips does remain the path of least resistance
in the absence of any destabilising factor."
A two-year rally in European stocks, fuelled by central
banks' largesse, had started lose steam in June as euro zone
data started to deteriorate and investors fretted over a
possible tightening in U.S. monetary policy.
Speaking on Friday at a global central banking conference in
the United States, Draghi said the ECB was prepared to respond
with all its "available" tools should inflation drop further.
Indexes in economies such as Italy, Spain
and Portugal, suffering from high public debt and low
inflation, led gains with rises of between 1 percent and 1.4
European bourses extended gains after a positive start on
Wall Street, where the globally tracked S&P 500 index
rose to a new high, sending a bullish signal for equities at
Steelmakers ArcelorMittal, Salzgitter
and Voestalpine were among top gainers in Europe after
analysts at UBS upgraded their shares to "buy" from "sell" in
expectation that the trio will benefit from a turnaround in the
The possibility of fresh ECB stimulus also helped the market
to take a French government reshuffle in its stride. Paris's
CAC-40 index was up 1.1 percent, having risen 2.1
percent the previous day.
France's Prime Minister Manuel Valls was expected to put
together a new pro-reform government on Tuesday, having resigned
the previous day after President Francois Hollande's eviction of
rebel ministers who had opposed budgetary rigour.
"The visibility on what Mr Hollande has been willing to
implement was getting weaker because of divergence within the
government, so he has solved this issue," said François Duhen,
director of dedicated research at CM-CIC Securities in Paris.
"I'd say it's more positive than negative if they manage to
convince enough members of parliament. But if they cannot find a
majority ... then we will head for significant trouble."
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 Blaise Robinson in Paris; Editing by