* FTSEurofirst 300 index closes 2.4 pct higher
* Strong earnings, rate cut hopes boost market
* Financials, techs, autos gain sharply
* ARM Holdings surges 11.9 pct after results
By Atul Prakash
LONDON, April 23 Europe's main share index
posted its biggest one-day gain in more than seven months on
Tuesday, buoyed by strong earnings and after a downbeat German
survey raised expectations of a rate cut in the euro zone.
The FTSEurofirst 300 ended up 2.4 percent at
1,183.03 points, its highest close since April 11 and the
biggest daily gain since early August. The index was also helped
by technical buying after it breached key resistance levels.
In the past few sessions, it has recouped more than half of
its recent selloff.
Investors rushed to buy equities after a survey showed
Germany's private sector shrank for the first time in five
months in April, reinforcing the case for the European Central
Bank (ECB) to cut interest rates at its policy meeting on May 2.
"The business cycle indicators are still not recovering
strongly and could be a signal that we are going to see some
additional stimulus coming through from the ECB," Robert Parkes,
equity strategist at HSBC Securities, said.
"European equities are still undervalued against their
historical averages, limiting their downside risks," he said,
adding that financials remained his preferred sector.
According to Thomson Reuters Datastream, the broader STOXX
Europe 600 index is trading at 11.8 times its one-year
forward earnings, against a 10-year average of 12.2.
Financial stocks was the best-performing sector, with the
STOXX Europe 600 Insurance index rising 3.7 percent and
European banks advancing 3.3 percent. Auto shares
, another cyclical sector, jumped 3.5 percent, while
technology stocks climbed 2.7 percent.
Results and updates from tech firms set the ground for a
rally in the morning, with ARM Holdings surging 11.9
percent after beating profit forecasts.
STMicroelectronics rose 8.8 percent after saying
signs of recovery and new products should drive a pickup in
sales in the second half, while Finnish lift and escalator maker
Kone gained 9.5 percent after raising its outlook.
According to Thomson Reuters StarMine, out of the 8 percent
of STOXX Europe 600 companies that have reported
results so far, 55 percent have met or beaten expectations.
Buying accelerated later in the session on positive U.S. new
homes sales and chain store data, and after major share indexes,
including the euro zone's blue chip Euro STOXX 50,
broke above their 50-day moving averages, marking a 50 percent
retracement of their recent fall.
The index rose 3.1 percent to 2,662.88 points to also close
above its 100-day moving average of 2,653.81. Charts suggested
some further upside in the near term.
"The index's short-term outlook has clearly improved with
today's movements. We have some trading opportunities here,"
Petra von Kerssenbrock, technical analyst at Commerzbank, said.
The index had the potential to rise to the 2,680-2,700 area
in the coming days, he said.
However, some technical analysts remained cautious.
"The FTSE 100, the Euro STOXX 50 and the CAC are
bouncing from key support, but apart from any short-term rebound
we continue to see more weakness into May," Michael Riesner,
head of equity technical analysis at UBS, said.
"So we think it is still too early to buy."
France's benchmark CAC-40 index rose 3.6 percent,
outperforming in Europe after a survey of purchasing managers
showed that French business activity, while still weak, wasn't
as bad as expected.
Among other sharp movers, Richemont, owner of
Cartier and other luxury brands, jumped 8.3 percent after saying
full-year profit would beat expectations, easing fears about a
sharp slowdown in demand for luxury goods in Asia.
Analysts said the longer-term outlook for European stocks
remained positive despite recent weaknesses.
"Our view is that we would end the year higher. We have
detected a change of mindset amongst investors this year. Whilst
they remain generally cautious, they appear to be looking for
opportunities to buy rather than to sell," Parkes said.