February 28, 2013 / 1:05 PM / 5 years ago

EADS rises as stimulus promises lift European shares

* Central bank support offsets Italian worries

* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 0.4 pct

* EADS and Essilor surge higher

* Any stock market fall in March seen as short-lived

By Sudip Kar-Gupta

LONDON, Feb 28 (Reuters) - European shares rose on Thursday, with aerospace group EADS among the top gainers, as fresh signs of central bank support enabled equities to recoup earlier losses caused by Italy’s political deadlock.

The pan-European FTSEurofirst 300 index was up by 0.5 percent at 1,166.54 points by around midday, putting it on track for its longest winning streak on a monthly basis since the index began in 1997.

The euro zone’s blue-chip Euro STOXX 50 index also advanced 0.4 percent to 2,622.36 points.

European stock markets fell earlier this week after the election in Italy produced a stalemate, reigniting worries over Italy’s ability to undertake reforms for its economy, which has been hit by the euro zone’s sovereign debt crisis.

Yet those worries were offset by fresh pledges by the European Central Bank and U.S. Federal Reserve this week to continue with steps to inject liquidity into markets, which have propped up the global economy and equities.

“I feel we are coming towards the end of a bull market cycle from March 2009. I see some near-term upside before a healthy correction, but for markets to then recover again as the year progresses,” said JN Financial investment manager Ed Smyth.

Smyth said he had sold a position on Italy’s FTSE MIB equity index, which was down 0.3 percent at 15,777.92 points, at 16,592 points at the start of the week.

He added that he saw Germany’s DAX equity index, which was up 0.7 percent at 7,729.99 points, falling to around 7,500 points over the coming month before recovering again to hit 8,000 points.


EADS reached record highs on Thursday, boosted by broker upgrades, while French eye lens maker Essilor surged 6.5 percent to top the FTSEurofirst 300 index after posting higher profits.

EADS’ latest gains mean the stock has risen more than 10 percent in the last two days, with brokers raising their forecasts after it reported higher profits on Wednesday.

“The company continues to pursue improvement to bottom line as a key goal for the organisation, hence solid confidence in operational leverage,” Kepler analysts wrote in a research note.

Most equity strategists and investors expect any stock market decline in March to be a relatively limited and minor one, with some pencilling in falls of 5 percent, before equity markets then resume an upwards trajectory from April onwards.

Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said the continued support of world central banks was more important than any political uncertainty, such as in Italy, that could hit equities in the short-term.

The decision by central banks to keep interest rates at record lows has hit returns on bonds and cash, driving investors to equities and Hartnett said this was also starting to feed through to the economy in areas such as the housing market.

“Central bankers rather than politicians are the dominant driver of asset prices, in our view. And central banks are winning because interest rates are starting to work,” Hartnett wrote in a research note.

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