* FTSEurofirst 300 up 0.8 pct, Euro STOXX 50 up 0.9 pct
* Nokia hits lowest level since 1997 after warning
* Investors brace for Thursday's Italian bond auction
* Pull-back offers good arbitrage plays -Cholet Dupont CIO
By Blaise Robinson
PARIS, April 11 European stocks rose on
Wednesday, halting a week-long slide as recently battered banks
rallied, although the rebound was seen as technical and could be
short-lived, with investors bracing for a key Italian government
bond auction on Thursday.
The FTSEurofirst 300 index of top European shares
closed 0.8 percent higher at 1,033.80 points, after losing 5.4
percent in four sessions.
Shares in euro zone banks led the rebound, with Intesa
SanPaolo up 5.5 percent and Commerzbank up
4.1 percent, with traders mentioning short covering.
The sector index had tumbled 21 percent in three
weeks, hammered by the return of fears over the region's
sovereign debt crisis, with Spain and Italy in the spotlight.
"It's just a short-term technical bounce after a brutal
drop. The fact is that everything has been broken on charts:
trendlines, channels, 200-day moving averages," said David
Thebault, head of quantitative sales trading at Global Equities
"We've got Italy's bond auction tomorrow and China's GDP
figure on Friday morning. Needless to say that the risk is on
the downside. The only interesting thing to buy at the moment is
The Euro STOXX 50 volatility index, Europe's main
barometer of anxiety known as VSTOXX index, dipped on Wednesday
after surging 50 percent in a week.
On Wednesday, Italy's one-year borrowing costs doubled in a
sale of short-term bills, fuelling fears over weaker euro zone
countries and highlighting investors' nerves ahead of a more
challenging auction of three-year bonds expected on Thursday.
Italy plans to offer up to 5 billion euros, including its
March 2015 BTP bond and 3 off-the-run issues, with yields
expected to rise there too.
Worries that Spain's budget troubles spread to Italy and the
slow progress made by Rome on structural reforms have recently
reversed a falling trend for Italy's debt costs, with the
10-year bond yield back above 5.5 percent.
In corporate news, Nokia was in the spotlight on
Wednesday, with its shares plummeting 14.5 percent and hitting
their lowest level since 1997 after the mobile phone maker
warned its phone business would post losses in the first two
quarters this year as it struggles to revamp its product line to
compete with rivals Apple and Samsung.
"This was a very rough warning," Inderes analyst Mikael
"I would have expected that by the second quarter the slide
would have been stopped, but now it seems that the first quarter
was horrible and the second quarter even worse."
Around Europe, UK's FTSE 100 index gained 0.7
percent, Germany's DAX index added 1 percent, and
France's CAC 40 rose 0.6 percent.
The euro zone's blue chip Euro STOXX 50 index,
which had slipped into 'oversold territory' on Tuesday, gained
0.85 percent to close at 2,341.36 points.
Despite Wednesday's bounce, the technical outlook for the
benchmark remains grim after it broke below a positive trendline
started in last September, sending a strong bearish signal.
"This correction is offering good arbitrage opportunities
between geographical zones as well as between sectors," said
Vincent Guenzi, chief investment officer at Cholet Dupont, which
has 2.3 billion euros ($3 billion) under management.
"U.S., Japanese, North European and German equities are less
risky, while stocks in emerging countries and in a number of
European countries such as France and Italy are more vulnerable,
although the offer more upside potential."