August 1, 2012 / 5:15 PM / 5 years ago

European shares rise, volumes low ahead of ECB

* FTSEurofirst 300 up 0.5 percent
    * Low trading volumes ahead of Fed, ECB
    * Next top riser on H1 sales boost, FY guidance hike

    By Tricia Wright
    LONDON, Aug 1 (Reuters) - European shares rose in light
trade on Wednesday as investors waited to see if policymakers
will back up pledges to support the euro zone with concrete
measures.
    Markets have rallied strongly in recent days after comments
by officials, including European Central Bank chief Mario
Draghi, raised expectations the bank will announce steps on
Thursday to ease market pressure on euro zone strugglers Spain
and Italy.
    The FTSEurofirst 300 closed up 0.5 percent at
1,068.20, having traded in a narrow range and in volumes at 69
percent of the 90-day daily average, with investors holding back
as the ECB meeting approaches.
    The euro zone's blue chip Euro STOXX 50 index
was 0.3 percent firmer at 2,333.38.
    "I get the feeling from the markets and the way that they
have been trading all of this week, since the (Draghi)
statement, that ...people are expecting good things," Derek
Hammond, head of institutional equity flows at Societe Generale,
said
    "If he now comes and delivers something positive, there is
no reason why (investors) would cut their positions in
anything... People will begin to step back into the European
markets."
    Lex van Dam, hedge fund manager at Hampstead Capital, which
manages $500 million of assets, said: "We all know that the
global economy is slowing and that the expectations on central
banks are too high, but in the meantime most people are long
cash and underweight equities which provides for support every
time stocks go down."
    Market participants also awaited the conclusion of a two-day
U.S. Federal Reserve meeting later in the day. Wall Street is
braced for another round of Fed bond purchases, and some see an
off chance that an announcement might come on Wednesday.
    Robust U.S. economic data releases on Tuesday helped give
rise to a belief the Fed might stop short of aggressive measures
for now, but data on Wednesday was mixed.
    A U.S. ADP private sector employment report showed an
increase of 163,000 jobs in July, beating forecasts for 120,000
new jobs, but a U.S. Institute for Supply Management
manufacturing report for July missed expectations.
    Given the potential for sharp variations in equity markets
following the central bank decision, strategists at CM-CIC
Securities in Paris recommend a 'strangle', or buying both put
and call options to ensure a benefit if the index moves
significantly in either direction.
    "If the ECB actually comes out and... confirms what's
already in the markets but indicates that it's imminent, ... I
think the markets might initially be disappointed that there
wasn't more of a commitment there, but I think they'd be
prepared to hold onto their gain," Mike Lenhoff, chief
strategist at Brewin Dolphin, said.
    
    NEXT BEST THING
    Ahead of the ECB meeting, investors were distracted by a
raft of earnings news.
    Next was the top riser across Europe, up 6.5 percent
after Britain's second-biggest clothing retailer defied the high
street gloom and beat its target for first-half sales growth.
 
    Trading volume in Next was robust, at almost three times the
90-day daily average. 
    Shire also notched up good gains, ahead 4.8 percent,
as the firm's second-quarter results beat expectations. The
drugmaker's trading volume stood at just over twice the 90-day
daily average. 
    Halfway through the European results season, companies'
performances are split down the middle, with 51 percent meeting
or beating watered down expectations while second quarter
year-on-year earnings growth is expected to have contracted
around 22 percent, according to Thomson Reuters Starmine data.

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