August 11, 2014 / 4:45 PM / in 3 years

DAX outperforms as European shares rebound from 2-week drop

* FTSEurofirst 300 closes up 1.3 pct at 1,323.12 points
    * Index had fallen 7 pct in last 2 weeks
    * Germany's DAX outperforms with 1.9 pct bounce
    * Euro STOXX 50 closes up 1.4 pct at 3,047.56 points
    * High risk of Russia intervening in Ukraine -NATO head

    By Sudip Kar-Gupta
    LONDON, Aug 11 (Reuters) - European shares rebounded on
Monday from a two-week drop, with the German DAX market
outperforming, after investors concluded Russia would not send
troops into Ukraine any time soon.
    Clashes continued between Ukrainian forces and pro-Russian
separatists, and NATO's chief said on Monday that there was a
"high probability" of Russia intervening militarily, yet traders
said Moscow was still likely to try and de-escalate the crisis.
    "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, closed up 1.3
percent at 1,323.12 points.
    The euro zone's blue-chip Euro STOXX 50 index 
also rose 1.4 percent to 3,047.56 points, while Germany's DAX
 outperformed with a 1.9 percent advance.
    Worries about the impact of Western sanctions on 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 8.2 percent after
stronger-than-expected quarterly results. 

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