March 26, 2013 / 9:10 AM / in 5 years

European shares regain some poise, Cyprus caps gains

* EuroSTOXX 50 up 0.4 pct, taking YTD gains to 0.9 pct

* Some investors looking to boost quarterly profits

* SocGen recommends buying euro zone on dips

By Toni Vorobyova

LONDON, March 26 (Reuters) - European stocks regained some poise in early trade on Tuesday, with some investors buying to boost quarterly returns, but uncertainty about the broader implications of Cyprus’s bailout kept a lid on any gains.

Cyprus secured a last-minute international rescue package over the weekend, avoiding a possible default or a potentially messy euro zone exit.

But market relief proved short-lived on Monday, after the head of euro zone finance ministers said the deal - which will see Cyprus wind down its second biggest bank and land large depositors with heavy losses - was a model for dealing with future euro zone banking crises.

He later moved to play down that statement and financials were mixed on Tuesday, with Spanish and Italian banks, such as Caixabank and Pop Milano, losing 2-3 percent, while others, like BNP Paribas traded steady or even edged higher.

“In the banking sector I think the market will be more cautious, but will also discriminate the bad from the best and that is what we are starting to see, with the weakest banks being deeply sold,” said Vincent Guenzi, chief strategist at Cholet Dupont, highlighting BNP Paribas as a possible winner.

Most other sectors managed to make some headway, as investors - who have enjoyed only modest gains in euro zone equities so far this year - took advantage of the weakened market in a last-ditch attempt to boost their quarterly returns.

The EuroSTOXX 50 index of euro zone blue chips was up 0.4 percent at 2,658.47 points, taking its gains for 2013 so far to just 0.9 percent. The pan-European FTSEurofirst 300 added 0.2 percent to 1,188.79 points.

“We hooked masses of selling yesterday afternoon, but in the absence of a ‘bad news chaser’, now we can have the quarter-end rally, so watch those new shorts being squeezed,” said Justin Haque, broker at Hobart Capital Markets.

In Britain, where the FTSE 100 has risen 8.2 percent this year, in part thanks to a weaker pound, traders said the opposite trend could occur, with investors locking in profits ahead of a four-day Easter break rather than trying to make more money. The FTSE 100 added 0.1 percent, lagging its euro zone peers on Tuesday.

Analysts at Societe Generale reiterated their neutral stance on British stocks - citing dividends as a chief attraction - while upgrading their already overweight-rated euro zone and advising investors to use any dips as a buying opportunity.

“Euro zone equities are trading at a 46 percent discount to U.S. equities ... We argue they deserve a closer look as many reforms shaped to bring medium- to long-term benefits have been adopted in Spain and Italy,” they said.

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