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Europe: Shares rebound from seven-week lows as techs, Italian banks recover

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[LONDON] A recovery in tech stocks and fresh optimism over troubled Italians banks lifted European shares from seven-week lows on Tuesday. Capita led the gains after offering a reassuring outlook.

The pan-European STOXX 600 index ended up 0.6 per cent, almost fully recovering losses from the previous session. Italy's benchmark rose 0.9 per cent.

Tech stocks rose more than 1 per cent after Monday's sell-off, when concern over valuations at US companies spilled over to Europe, particularly companies supplying Apple.

"The tech sector has been relied upon as the driver of the bull run, particularly in the US, so whenever there is any weakness that's observed there, it is quickly picked up by the market," said Jonathan Roy, advisory investment manager at Charles Hanover Investments. "The sector is fairly well-valued, in some respects quite richly valued, so that could be a weakness if we do see a souring in sentiment."

Dialog Semiconductor, Infineon and ASM International were among the tech stocks gaining the most, rising 1.2 to 4.7 per cent.

Italian banks were another bright spot, gaining 1.1 per cent amid renewed hopes for a rescue of struggling Veneto banks. Italy's economy minister said a solution was "close".

UBI Banca and BPER Banca led European banks, rising 3.4 per cent and 2.5 per cent respectively. UniCredit gained 1.6 per cent. Receding election worries also helped. "It's quite evident that the authorities are not too keen to let any institutions really, really fail ... there's always a last-minute deal done for them," Charles Hanover Investments' Roy said. He sees value in Italy and Spain over the next 18 to 24 months.

Among individual stocks, shares in troubled British outsourcing firm Capita jumped 15 per cent after the group said it hoped to improve its profitability and secure more contract wins in the second half of 2017, following a series of profit warnings.

Visitor attractions group Merlin Entertainments fell around 2.6 per cent, however, after giving a cautious outlook. Attacks in Manchester and London had hit domestic demand, it said.

Broker action propelled shares in London Stock Exchange Group 5.4 per cent higher after Credit Suisse and RBC raised their target prices on the stock.

Greek shares rose 1.6 per cent after officials said a compromise on debt may be reached on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later.

"Attention has now squarely turned to debt relief talks," Barclays analysts said in a note. "We believe that a marked effort would still be required to enable Greece to secure debt sustainability."