RTRS: Europe shares extend gains as defensives advance
European shares edged up in choppy trade on Tuesday, extending a winning streak to four days as investors switched to defensives and sold financials that had gained from a U.S. plan to rid banks of toxic assets.
At 1115 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.4 percent at 742.20 points after a 3 percent surge on Monday, when the United States revealed details of its plan to purge banks of up to $1 trillion in bad assets.
The pan-European benchmark fluctuated between a gain of 1.5 percent and a loss of 0.3 percent as banks rose initially on a bullish Deutsche Bank update but lost ground with the rest of the market after euro zone and UK macro data showed more job losses and higher inflation.
Defensive drugmakers and food stocks added most points to the index, with Sanofi-Aventis (SASY.PA: Quote, Profile, Research, Stock Buzz) up 3.1 percent, food retailer Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz) up 2.8 percent higher and foods group Unilever (UNc.AS: Quote, Profile, Research, Stock Buzz) up 2.7 percent.
Analysts said investors would stay cautious as they waited to see if the U.S. plan would yield results.
"It is way too early to call the end of the bear market. The financials have still recouped only a little part of the big losses," said Philippe Gijsels, strategist at Fortis in Brussels.
"The Geithner plan is certainly a step in the right direction and should eventually help but it is not a miracle either. We will have to see whether the plan will actually work," he said.
British consumer price inflation rose unexpectedly to 3.2 percent in February, while key figures from euro zone services and manufacturing activity showed the economy's contraction eased a bit, while companies continue to slash jobs. [ID:nLO933392] [ID:nLAG003310]
Analysts warned the economy may see a sharper contraction in the first quarter than the 1.5 percent it shrank in the last three months of 2008.
Across Europe, Germany's DAX .GDAXI and France's CAC 40 .FCHI were up 0.4 and 0.3 percent while the FTSE 100 index .FTSE was 1 percent lower.
BANKS BACK IN THE DOGHOUSE
Financials were broadly lower, with heavyweight HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) slumping 7.8 percent on concerns over Asian growth after Bank of China (3988.HK: Quote, Profile, Research, Stock Buzz) posted a 58 percent drop in fourth-quarter earnings, traders said.
Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) fell 2 percent after it said it would ask shareholders for the option to raise equity capital for acquisitions.
But Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) rose 1.4 percent after saying it could return to profit this year if the global economy, financial markets and the regulatory environment develop as expected. German peer Commerzbank (CBKG.DE: Quote, Profile, Research, Stock Buzz) jumped 6.8 percent.
Commodity shares also weighed on the index, tracking a fall in oil and metal prices.
Miners fell after copper prices eased from more than four-month highs. BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) and Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) fell by 5.7-8.4 percent.
Analysts said that a recent bear market rally that lifted the FTSEurofirst by 15 percent in 11 trading sessions was unlikely to be sustained.
"A slowdown is coming down the road because the rally was very aggressive all over the world and it's unusual that this will go on," said Achim Matzke, a strategist at Commerzbank in Frankfurt.
The benchmark is down almost 11 percent so far this year after plunging 45 percent in 2008, punctured by a credit market crisis stemming from a meltdown in the U.S. mortgage market.
