MW: Banks, miners lead rebound for European shares
Deutsche Telekom, L'Oreal advance after broker upgrades
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares bounced on Wednesday, with investors picking up shares in banks and miners bruised by heavy selling in the previous session.
After a 2.5% downturn on Tuesday, the Stoxx Europe 600 index (ST:SXXP 236.43, +4.32, +1.86%) rose 1.3% to 235.05 as volatility continued in European markets amid worries that sovereign debt issues will spur a re-run of the 2008 banking crisis.
Banks were slammed on Tuesday but were among the strongest performers on Wednesday, with UBS (CH:UBSN 15.31, +0.33, +2.20%) (UBS 13.31, +0.14, +1.06%) shares up 3.1%, Credit Agricole (FR:ACA 9.15, +0.37, +4.23%) shares up 4% and Banco Santander (ES:SAN 8.37, +0.20, +2.42%) (STD 10.37, -0.04, -0.38%) shares up 2.9%.
"We often see a decent rebound after a strong sell-off as risk reduction flows fade and sidelined buyers come in, but it is not clear whether we are there yet. Event risk is also still high in these fragile markets," said analysts at Danske Bank.
Of the regional benchmarks, the French CAC-40 index (FR:PX1 3,413, +81.76, +2.45%) rose 2.1% to 3,401.89, the U.K. FTSE 100 index (UK:UKX 5,027, +86.31, +1.75%) moved back over 5,000, trading up 1.3% at 5,004.18, while the German DAX index (DX:DAX 5,752, +81.06, +1.43%) rose 1.3% to 5,746.32.
Asian shares were higher on Wednesday after U.S. stocks managed to end with minimal losses on Tuesday. U.S. futures were pointing to gains on Wednesday.
The euro (CUR_EURUSD 1.2311, -0.0061, -0.4931%) declined 0.6% to $1.2281 against the dollar. Still, light sweet crude futures and metal futures rose as investors dipped a toe back into the riskier end of the asset market, helping miners and oil producers advance.
Shares of BHP Billiton (UK:BLT 1,829, +65.50, +3.71%) (BHP 61.62, +0.12, +0.20%) rose 3.7%, Xstrata (UK:XTA 959.50, +40.00, +4.35%) shares were up 4.1% and Rio Tinto (UK:RIO 2,989, +133.00, +4.66%) (RTP 42.86, +0.78, +1.85%) shares climbed 4.7%.
In the oil sector, Repsol (ES:REP 16.21, +0.37, +2.34%) (REP 19.89, -0.18, -0.90%) shares rose 1.6% and Total (FR:FP 37.77, +0.72, +1.94%) (TOT 45.45, +0.32, +0.71%) shares were up 1.6%.
BP (BP 42.56, +0.70, +1.67%) (UK:BP. 487.80, +2.60, +0.54%) shares slipped 0.3% as the oil giant attempts a "top-kill" procedure to stem the Gulf of Mexico oil spill. BP said the procedure may take up to two days and warned that the live video feed that Congress forced the company to set up may "not provide a reliable indicator of the overall progress, or success of failure, of the top kill operation as a whole."
The luxury goods retailer swung to a fiscal-year net profit of 81.4 million pounds ($117.2 million). Last year, the firm posted a loss of 6.0 million pounds after taking a 129.6 million pound impairment charge relating to its Spanish operations.
Portugal Telecom (PT:PTC 7.68, +0.35, +4.74%) (PT 9.12, +0.11, +1.22%) shares were up 3.9% after the finance director of Spanish telecom giant Telefonica (ES:TEF 15.44, +0.33, +2.15%) (TEF 56.66, +0.11, +0.19%) said in an interview published in the Financial Times that the company could launch a hostile takeover bid for Portugal Telecom if the Portuguese group won't sell its share of Brazilian mobile phone joint venture Vivo.
Telefonica shares were up 1.4%.
Deutsche Telekom (DE:DTE 8.90, +0.13, +1.47%) (DT 10.99, +0.22, +2.04%) climbed 1.6% after it was upgraded to overweight from neutral at J.P. Morgan.
The broker cited the company's positive earnings momentum and its small exposure to Southern Europe. Also, the management "has taken convincing steps towards a much clearer shareholder value focus," the broker said.
L'Oreal (FR:OR 74.46, +2.21, +3.06%) shares were up 2.7% after the cosmetics company was upgraded to buy from neutral at UBS.
L'Oreal has been one of the worst performing stocks in its sector and it's now trading in line with peers, which is not justified considering the gradual recovery in organic top-line growth, UBS said.
