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European shares gain, China moves help

[LONDON] European equities gained on Wednesday after a volatile start to the week, drawing support from brokerage measures in China to invigorate the country's battered markets and from hopes for policy easing by major central banks.

The pan-European FTSEurofirst 300 index ended 0.2 per cent higher at 1,395.70 points after falling to a low of 1,383.54 earlier in the day. Benchmarks in London, Paris and Frankfurt were up 0.3 to 0.4 per cent. "We expect some more volatility going forward, but we see the recent sell-off as a correction and not the start of a bear market," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

"Possible actions by some central banks such as China doing more to stimulate its economy, the European Central Bank extending its bond-buying programme and the Fed delaying an interest rate hike are likely to support the market."

Analysts said US private jobs data prompted some investors to believe the Federal reserve might not start its rate hike cycle from this month. The ADP National Employment Report showed US private employers added a smaller than expected 190,000 jobs in August.

The more comprehensive non-farm payrolls report is due on Friday, the last monthly report before the Fed meets on Sept. 16-17. It is widely expected to make an announcement on rates at the meeting.

"The ADP data also improved sentiment. The market seems to be willing to seize any kind of information that supports the theory that the Fed might not raise interest rates in September," IG analyst Chris Beauchamp said.

European stocks have suffered a bruising end to the summer, falling more than 2 per cent in the last two days after dropping about 10 per cent since the end of July. But brokers and investors say there is still value in high-yielding blue-chip stocks at a time of central bank bond-buying in the eurozone.

China, the epicentre of worries over the global growth outlook, enjoyed a late market recovery after nine Chinese brokerages pledged to buy more than 30 billion yuan of shares, according to the China Securities Journal.

That eased investor fears that Beijing may be intensifying a trading crackdown. "The general level of volatility is going to stay for some time. People are still nervous despite several policy responses in China, but in the short term we shouldn't close at another bottom," CLAIRINVEST fund manager Ion-Marc Valahu said.

"We had a lot of shorts on European indices such as the DAX and the CAC, and used the last week's pullback to cover most of it. We are long at this point and are just waiting for some catalysts to add more."

Among standout features, shares in Belgium's UCB rose 4.2 per cent to be the top gainer in the FTSEurofirst 300, after Amgen said its experimental bone drug, being developed with UCB, was found to be more effective than an already marketed drug in a late-stage study.