* FTSEurofirst 300 up 0.1 percent
* Bouygues, EADS help lift France's CAC
* Charles Stanley targets drop to 2,500 for Euro STOXX 50
By Tricia Wright
LONDON, Feb 27 European shares crept higher on
Wednesday, steadying after the previous session's sharp losses
helped by the U.S. Federal Reserve's defence of its
asset-buying, though jitters over the euro zone kept a lid on
Fed Chairman Ben Bernanke strongly defended the U.S. central
bank's monetary stimulus on Tuesday, which eased worries over a
possible early retreat from bond purchases.
The FTSEurofirst 300 was up 0.1 percent at 1,151.18
by 1204 GMT, following Tuesday's 1.4 percent drop when Italy's
election stalemate took its toll on investor sentiment.
Much of the attention in morning trade was focused on an
Italian bond auction, where the country's 10-year debt costs
climbed more than half a percentage point, reviving concern
about the future of the euro zone.
"I remain of the opinion that we've seen the highs in the
short-term and we're due a bit of a correction," Michael Hewson,
analyst at CMC Markets, said.
"Basically, Italy will not have a government of any shape or
form for the next two or three months, so really it's just a
question of being defensive, taking a little bit of risk off the
The euro zone's blue-chip Euro STOXX 50 index
was 0.5 percent firmer at 2,582.88, having sunk 3.1 percent to
three month lows on Tuesday, extending its retreat from an
18-month high of 2,754.80 points hit at the end of January.
France's CAC 40 index was among the top performing
euro zone country indexes on Wednesday with a 0.7 percent rise,
aided by robust results newsflow from Bouygues and
Bouygues jumped 8.3 percent after the construction-to-media
conglomerate unveiled a 3 percent rise in full-year sales,
whilst maintaining its dividend.
Airbus parent EADS advanced 6.4 percent as it predicted
higher profit this year on the heels of stronger than expected
2012 earnings and a clampdown on costs.
"Strong cash generative growth and profit performance look
set to continue... Notwithstanding risks, not least the A350
programme, we see the risk/return profile as compelling,"
Investec Securities said in a note, repeating its "buy" rating.
Charts painted a gloomy picture. Charles Stanley technical
analyst Bill McNamara highlighted that the Euro STOXX 50 has
entered a new volatile phase, with the drop from Monday's peak
to Tuesday's closing low a hefty 4.8 percent.
"A bounce today looks likely but this rising volatility does
look like it could lead to lower prices in the medium-term, with
2,500 a realistic downside target," he said.
Lynnden Branigan, technical analyst at Barclays Capital,
however, said there were a couple of support levels preventing
them from becoming too bearish on the index.
"Ideally we would like to see a close below the 10 Dec low
at 2,567 and a break below 2,552 (Fibonacci level) to signal a
move toward the 2,500 area," he said.
Both the Euro STOXX 50 and the FTSEurofirst 300 index are
20-25 percent above their 2012 lows, since a pledge last year by
the European Central Bank (ECB) to protect the euro currency
from the area's debt crisis did much to bolster investor
confidence in the region.
BCA Research wrote in a note that the full-year outlook for
global equities remained positive, given the backdrop of a
gradual improvement in the world economy and the fact that
equities offer more than cash or bonds, where returns have been
hit by record low interest rates.
"This creates a 'sweet spot' for equity investors - modest
growth, low inflation and negative real rates will support
corporate earnings and embolden risk taking," wrote BCA