August 11, 2014 / 2:20 PM / in 3 years

DAX leads European rebound on Ukraine hopes

* FTSEurofirst 300 rebounds 1.1 pct
    * Index had fallen 7 pct in last 2 weeks
    * Germany's DAX outperforms
    * Banco Popolare surges after forecast-beating results

    By Sudip Kar-Gupta
    LONDON, Aug 11 (Reuters) - European shares rebounded on
Monday from a two-week drop after investors concluded Russia
would not send troops into Ukraine any time soon.
    Late on Friday, Russia's Defence Ministry said it had ended
military exercises in southern Russia that the United States had
called "provocative."
   Though clashes continued between Ukrainian forces and
pro-Russian separatists, traders interpreted Russia's move as a
    "The Ukraine situation appears to be stabilising. European
shares took a big beating over the last couple of weeks, so
we're seeing a relief rally," said Ion-Marc Valahu, a fund
manager at Geneva-based firm Clairinvest.
    The pan-European FTSEurofirst 300 index, which had
fallen some 7 percent over the last two weeks, rose 1.1 percent
to 1,320.43 points. The euro zone's blue-chip Euro STOXX 50
index rose 1 percent to 3,035.93 points. 
    Germany's DAX outperformed, rising 1.6 percent. 
    Worries about the impact of Western sanctions against Russia
had pushed the DAX down by around 11 percent from a record high
of 10,050.98 points in late June, since many top German
companies have significant business ties to Russia.
    "I went long on the Euro STOXX and the DAX at the end of
last week," said Valahu, referring to positions betting on
future gains.
    With the situation on the ground in Ukraine remaining
uncertain, any relief rally could be fragile. 
    Ukrainian forces were poised to recapture the city of
Donetsk from  separatists, and U.S. President Barack Obama and
German Chancellor Angela Merkel agreed that any Russian
intervention in Ukraine - even for 'humanitarian' reasons -
would provoke 'additional consequences.' 
    "The 10 percent correction in Europe has brought some nice
buying opportunities, and the market was clearly oversold on
Friday. But this is mostly a technical bounce, which should last
just a few days," said Arnaud Scarpaci, fund manager at
Paris-based Montaigne Capital.
    Euro zone banking shares - recently hit by the bailout of
Portugal's Banco Espirito Santo - featured among the
top gainers on Monday. Italy's fourth-biggest bank  Banco
Popolare rose 7.7 percent after stronger-than-expected
quarterly results.    

 (Additional reporting by Blaise Robinson; Editing by Larry King
and John Stonestreet)

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