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Europe: Stocks rebound from two-day drop despite Volkswagen slide
[LONDON] After their worst fall in two weeks, European stocks clawed back some losses today, helped by a broad-based rally.
Equities are recovering after the Federal Reserve's decision to keep rates unchanged last week raised questions about global growth. Three Fed officials argued over the weekend that a rate increase is still warranted for this year. Investors will get a clearer picture over the next few days, and those focused on the long term can find value in European shares after recent declines, according to MPPM EK's Guillermo Hernandez Sampere.
The Stoxx Europe 600 Index added 0.9 per cent at the close of trading, reversing a drop of 0.2 per cent. All industry groups rallied except miners and carmakers. Volkswagen AG slid 19 per cent, leading auto stocks lower, after admitting to systematically cheating on US air pollution tests for years.
"Fundamentally, we have good buying opportunities in Europe," said Sampere, who helps manage the equivalent of $167 million as head of trading at MPPM in Eppstein, Germany. "The picture would be friendlier if Volkswagen hadn't happened."
The Stoxx 600 is trading at 15.5 times the estimated earnings of its members, down from a high of 17.3 times as recently as April. Investors are also speculating whether European Central Bank President Mario Draghi will act on stimulus needs in response to the Fed's decision. He and other Governing Council members will make public appearances this week.
Traders are pricing in a 20 per cent chance the Fed will raise rates next month, and almost even odds of an increase in December.
LEG Deal Among other shares active on corporate news, LEG Immobilien AG rallied 5.9 per cent after Deutsche Wohnen AG offered to buy it.
Shire Plc rose 1.1 per cent after winning European approval for its treatment of attention deficit hyperactivity disorder.
RSA Insurance Group Plc plunged 21 per cent after Zurich Insurance Group AG abandoned an offer for it. Dialog Semiconductor Plc plummeted 19 per cent after the chipmaker said it will buy Atmel Corp. for about US$4.6 billion.
News of Volkswagen cast a shadow on other carmakers too. Renault SA and BMW AG declined 1.5 per cent or more. Porsche SE tumbled 17 per cent.
Greece's ASE Index fell 0.6 per cent after Alexis Tsipras and his party Syriza won the country's second election in eight months. Mr Tsipras, who came into power the first time around pledging to end austerity must now implement the spending cuts and tax increases he ended up agreeing to after a standoff with euro region leaders.