Europe: Shares recoup week's losses as US cheers markets

[LONDON] European shares rose on Thursday, recouping all their losses this week, with gains across the board after market expectations of a US rate hike were pushed back and as economic growth figures were revised sharply upwards.

The pan-European FTSEurofirst 300 index, which fell 1.9 per cent on Wednesday, closed up 3.6 per cent, while the euro zone's blue-chip Euro STOXX 50 index gained 3.5 per cent.

Bouygues was one of the best performing stocks, rising 5 per cent after the French conglomerate raised the profit goal for its telecoms arm.

But French drinks maker Pernod Ricard fell 1.7 per cent after reporting full-year 2014/15 underlying profit growth of 2 per cent, slightly below analysts' expectations.

Persistent fears about an economic slowdown in China, which intensified after the world's second largest economy devalued its yuan currency earlier in August, have rattled financial markets this month and drove the FTSEurofirst down 5.4 per cent on Monday.

However, Wall Street racked up its biggest one-day gain in four years on Wednesday after New York Fed President William Dudley said the likelihood of a September rate hike "seems less compelling" than it was only weeks ago, in a sign that China's woes could affect US monetary policy.

The US economy grew faster than initially thought in the second quarter on solid domestic demand, though, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year. "The bounce in Wall Street and stabilisation in Asia are causing the market to rally back. My short-term indicators are telling me that we hit a bottom in the market earlier this week," said Clairinvest fund manager Ion-Marc Valahu.

The FTSEurofirst remains down by around 10 per cent in August due to the alarm about China, and the index is at risk of its biggest monthly loss in four years.

However, some fund managers said stimulus measures from the European Central Bank (ECB) will offer medium-to-long term support for Europe's economy and financial markets.

According to Thomson Reuters StarMine data, 58 per cent of the companies on the pan-European STOXX 600 index have beaten or met expectations with their second-quarter results.

Data on Thursday also showed an unexpected rise in French industrial morale in August. "Regional equities are attractive and well supported by the fundamentals today, notably Europe, the US and Japan where earnings multiples are in an inexpensive range of 12 to 18 times currently," said Lorne Baring, managing director at asset management firm B Capital.

REUTERS