[LONDON] European stocks rebounded from their biggest two-day drop since April, helped by a rally in German shares. Greek shares fell amid a debt impasse.
The Stoxx Europe 600 Index added 0.6 per cent to 385.49 at the close of trading. It reversed losses of 1.1 per cent after the European Commission said it would restart talks with Greece if offered new proposals. Germany's DAX Index also swung to gains, rising 0.5 per cent as a drop in the euro helped exporters. Spanish and Portuguese shares erased declines exceeding 1.5 per cent.
"Stocks will recover once people refocus on improving fundamentals without distractions fogging up the picture," said Michael Woischneck, an equity manager at Lampe Asset Management GmbH in Dusseldorf, Germany. He helps oversee about US$7 billion. "We can contain any fallout from Greece, especially for Spain, Ireland and Portugal."
Greece's ASE Index fell 4.8 per cent, completing the biggest three-day drop since anti-austerity party Syriza took charge in January. Weekend negotiations to find a deal that will help Greece avert default and stay in the euro area ended in acrimony, sending shares lower yesterday. The region's finance chiefs next meet June 18.
Investors are also watching for cues on the timing of a US rate increase, with Federal Reserve officials starting a two-day meeting on Tuesday. While policy makers are expected to leave rates unchanged this month, some improving economic reports have stoked concern the Fed will go ahead with raising them later this year. A release on Tuesday showed housing starts in May capped the best back-to-back readings since 2007.
Among shares active on corporate news, Ladbrokes Plc rose 4.4 per cent after Morgan Stanley raised its rating on the shares to overweight, similar to buy.
Air France-KLM Group slipped 3.4 per cent after saying it will review investment plans and scrap some routes. Coloplast A/S plunged 7.9 per cent after the company lowered its forecasts for revenue growth and profit margin.
Ashtead Group Plc lost 2.7 per cent as the equipment-rental company forecast capital expenditure of more than 1 billion pounds in the coming year.