LONDON (MarketWatch) - European shares gained for the sixth straight session on Tuesday, the day of the U.S. presidential election, as one broker issued a buy signal for the region and interest rate cuts continued to offer support.
The pan-European Dow Jones Stoxx 600 index rose 0.8% to 225.09, as insurance giant Allianz climbed 9.4%, food producer Nestle advanced 2.6% and banking group BBVA rose 5.8%.
Morgan Stanley issued a "full house buy signal" on European equities, with the broker stating that its four indicators -- valuation, capitulation, risk and fundamentals -- all indicate buy.
"The latest elements that pushed us there have been a capitulation among retail investors, purchasing managers and sell-side analysts, as measured by record mutual fund outflows, ISM new orders below 40 and analysts revisions collapsing. The idea is that when these three groups know about the bad news, equity prices are probably already reflecting it," the strategists said.
Additionally, the Australian central bank cut its cash rate by a larger-than-expected three-quarters of a percentage point, citing the effects of the global slowdown, falling commodity prices and a likely downturn in domestic spending. See full story.
Economists expect the European Central Bank and the Bank of England to cut rates sharply on Thursday.
"The global measures taken to help alleviate the pressures in financial markets coupled with a simultaneous reduction in global interest rates should provide a recovery base for equity markets," said Elin Anders, European equity strategist at Cazenove.
On a national level, the French CAC-40 index climbed 2.5% to 3,613.42, the German DAX 30 index rose 2% to 5,128.97 and the U.K. FTSE 100 index jumped 2.1% to 4,536.65.
U.S. stock futures climbed as the race for the White House neared the finish line. Read more on election. See Indications
"The good news is that the stock market has tended to do rather well between the day of the election and the end of the year....the bad news is that the honeymoon has tended to end rather quickly. The average rise in the year following each election since 1960 has been a paltry 4.5%," said economists at Capital Economics.
RBS, UBS gloomy
Banking giant Royal Bank of Scotland fell 4.8% in London.
The bank said that underlying operating profit rose 7% in the first nine months of the year but it expects a slowing economy, dislocation in the financial markets and risk reduction measures to hurt fourth-quarter and fiscal-year results. See RBS story.
UBS shares traded flat in Switzerland as it issued a similarly gloomy outlook for the final quarter of 2008.
The Swiss lender swung to a third-quarter net profit of 296 million Swiss francs ($251.9 million) in the quarter. The profit follows four consecutive quarters of losses when the lender took more than $46 billion in mortgage-related write-downs. See full story.
Insurer Swiss Reinsurance fell 4.8%. It swung to a third-quarter net loss of 304 million Swiss francs ($259.8 million) due to investment losses and charges linked to catastrophe claims and said it will suspend its share buyback.
Still there was some good news from companies updating investors.
Shares in retailer Marks & Spencer jumped 8.8% after it held to its dividend. First-half profit fell 44% to 221.7 million pounds, while sales rose 0.8% to 4.22 billion pounds.
