MW: European shares rebound as volatility continues
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 companies bruised by heavy selling in the previous session.
After a 2.5% downturn on Tuesday, the Stoxx Europe 600 index (ST:SXXP 237.53, +5.42, +2.34%) rose 1.9% to 236.57 with markets volatile amid worries that sovereign-debt issues will spur a rerun of the 2008 banking crisis.
Banks were slammed on Tuesday but were higher on Wednesday, with UBS (CH:UBSN 15.23, +0.25, +1.67%) (UBS 13.31, +0.14, +1.06%) shares up 1.7%, Credit Agricole (FR:ACA 9.07, +0.31, +3.58%) shares up 3.2% and Banco Santander (ES:SAN 8.32, +0.15, +1.85%) (STD 10.31, -0.06, -0.58%) shares up 1.7%.
"We often see a decent rebound after a strong selloff 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.
Giving nervous investors some reason for optimism on Wednesday, the Organization for Economic Cooperation and Development said that economic growth across the world's developed economies is picking up faster than expected, although it did highlight that sovereign debt poses a risk to recovery.
Of the regional benchmarks, the French CAC-40 index (FR:PX1 3,419, +87.45, +2.63%) rose 2.2% to 3,403.29, the U.K. FTSE 100 index (UK:UKX 5,042, +101.32, +2.05%) moved back over 5,000, trading up 1.5% at 5,015.77, while the German DAX index (DX:DAX 5,779, +109.84, +1.94%) climbed 1.5% to 5,754.84.
Asian shares ended higher on Wednesday after U.S. stocks managed to end with minimal losses on Tuesday. U.S. stock futures were pointing to mild gains on Wednesday. See Indications.
The euro (CUR_EURUSD 1.2321, -0.0053, -0.4284%) declined 0.5% to $1.2293 against the dollar. Still, light sweet crude-oil 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 1,845, +81.50, +4.62%) (BHP 62.63, +1.01, +1.64%) rose 3.7%, Xstrata (UK:XTA 967.60, +48.10, +5.23%) shares were up 4.6% and Rio Tinto (UK:RIO 3,039, +182.50, +6.39%) (RTP 43.67, +0.81, +1.89%) shares climbed 5%.
In the oil sector, Repsol (ES:REP 16.27, +0.44, +2.75%) (REP 19.89, -0.18, -0.90%) shares rose 2.1% and Total (FR:FP 37.71, +0.67, +1.79%) (TOT 45.34, -0.11, -0.24%) shares were up 1.8%.
BP (BP 41.89, -0.67, -1.57%) (UK:BP. 484.15, -1.05, -0.22%) shares slipped 0.8% 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 retailer swung to a fiscal-year net profit of 81.4 million pounds ($116.9 million), as exceptional charges fell sharply, and sales of shoes and non-apparel accessories climbed. Read more on Burberry.
Portugal Telecom (PT:PTC 7.72, +0.38, +5.12%) (PT 9.12, +0.11, +1.22%) shares rose 4.9% after the finance director of Spanish telecom giant Telefonica (ES:TEF 15.41, +0.30, +1.99%) (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 8.93, +0.16, +1.87%) (DT 10.99, +0.22, +2.04%) climbed 1.3% 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 74.94, +2.70, +3.74%) shares were up 3.3% 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.
