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GLOBAL MARKETS-Corporate cheer for stocks, policy frontier for euro
April 29, 2014 / 11:56 AM / in 3 years

GLOBAL MARKETS-Corporate cheer for stocks, policy frontier for euro

* Earnings, M&A lift stocks
    * Euro zone money market rates jump
    * Draghi cools ECB QE talk
    * Ukraine/Russia on backburner

    By Jamie McGeever
    LONDON, April 29 (Reuters) - European stocks rose on
Tuesday, lifted by well-received corporate earnings and merger
and acquisition activity as investors pushed mixed signals on
the European Central Bank policy outlook and crisis in Ukraine
onto the back burner.
    Investors also digested the latest European bank "stress
tests", a beefed-up set of rules stipulating that 124 of the
continent's top banks must be able to survive simultaneous routs
in bonds, property and stocks. 
    Equities drew initial support from the GfK index of German
consumer confidence holding at a multi-year high of 8.5 heading
into May, as well as earnings reports from Finnish telecom giant
Nokia and German chipmaker Infineon. 
    Nokia shares jumped more than 7 percent after it unveiled
plans to return $3.1 billion to shareholders via buybacks and
extra dividends, while Infineon rose more than 5 percent after
second quarter profit topped estimates. 
 
    The equity-friendly tone to markets on Tuesday was helped,
if not driven, by figures that showed Britain's economy grew at
a solid 0.8 percent pace in the first quarter, giving an annual
rate of growth of 3.1 percent, the fastest since 2007.
 
    "Investors are waiting to see the start of some positive
earnings momentum, which has been missing in recent years. Any
sign of a positive momentum is likely to support share prices,"
James Butterfill, global equity strategist at Coutts, said.
    "We are also witnessing the biggest indicative M&A
activities since the credit crisis, highlighting that corporate
confidence is improving," he added.
    At 1130 GMT the FTSE Eurofirst 300 index of leading European
shares was up 0.8 percent at 1347 points and Germany's
DAX was up 1.2 percent at 9558 points.
    Britain's FTSE 100 index was up 0.7 percent at 6747
points and France's CAC 40 up 0.4 percent at 4478
points, while European bank stocks outperformed the broader
index by around 2:1.
    In Asia, the MSCI's broadest index of Asia-Pacific shares
outside Japan fell 0.2 percent, but U.S. stock
futures pointed to a higher open of between 0.3 and 0.5 percent
on Wall Street .
    
    PRESSURE ON ECB TO EASE?
    Currencies and bonds investors took their cues more from the
mixed signals on whether the ECB will ease policy in the coming
weeks and months to fight of the threat of deflation.
    The deflationary forces were intensified by figures that
showed euro zone bank lending to the private sector contracted
yet again in March, and overnight money market rates rose to the
highest level this year as banks continued to pay down cheap ECB
loans taken out at the height of the crisis.
    But European Central Bank president Mario Draghi told German
lawmakers on Monday that further monetary easing in the form of
bond-buying remains some way off, and the ECB pumped more
liquidity into the market on Tuesday through its weekly money
market operations.
    "Money market developments are putting more pressure on the
ECB. If rates don't come down, the ECB is bound to do
something," said Jan von Gerich, chief fixed income strategist
at Nordea in Helsinki.
    The rise in overnight money rates to 0.4 percent helped
support the euro, which rose as high as $1.3878. At 1130
GMT it was little changed on the day at $1.3858.
    German inflation data later on Tuesday is expected to show
an increase in April, ahead of euro zone figures on Wednesday
which are expected to rise to a still-low 0.8 percent from a
multi-year trough of 0.5 percent.
    The dollar index, a measure of the greenback's value against
a basket of currencies, was flat on the day at 79.66, and
sterling was also little changed at $1.6810, coming off
the high immediately after the Q1 GDP figures.
    Political news from Ukraine continues to unnerve investors,
but not enough to divert their cash out of riskier assets such
as stocks and into safer-haven government bonds.
    The European Union said on Tuesday it imposed sanctions on
15 Russian political and military leaders, including a deputy
prime minister. This followed action from the United States
against Russian individuals and firms on Monday. 
 
    On the economic front, the Federal Reserve begins a two-day
policy meeting on Tuesday, which is expected to result in the
continued paring back of its bond-buying stimulus.
 
    In commodity markets, Brent crude oil was up 0.5
percent at $108.64 a barrel, U.S. crude was up 0.6
percent at $101.45 a barrel and gold was down 0.5 percent at
$1,289.80 an ounce.

 (Reporting by Jamie McGeever, Marius Zaharia and Tricia Wright;
Editing by Alison Williams; To read Reuters Global Investing
Blog click here; for the
MacroScope Blog click on blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on
blogs.reuters.com/hedgehub)

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