European shares rose yesterday, reversing the previous session’s slide after economic growth data from China came in a touch above forecasts.
At the close, the pan-European FTSEurofirst 300 index was up 1.2 per cent at 1,322.51 points, in a rebaound most traders saw as a reaction to a one per cent fall in the previous session.
Earlier this month, the index hit a near six-year high, but the rally has been halted by worries over the crisis in Ukraine as well as concerns about the pace of Chinese growth.
Data yesterday showed China’s economy grew at its slowest pace in 18 months in the first quarter, at 7.4 per cent, though the figure was slightly stronger than the median forecast of 7.3 per cent in a Reuters poll.
“The Chinese data maybe not aggressively positive, but it certainly hasn’t done anything to derail optimism and gave markets the impetus for a strong session,” Alastair McCaig, analyst at IG, said.
French utility Suez Environnement surged 7.1 per cent, the top FTSEurofirst gainer, while Veolia Environnement gained 4.3 per cent, boosted by merger speculation.
The utilities featured among top gainers after Exane BNP Paribas analysts said in a note the “stars are aligned” for the French waste and water companies to revisit the idea of a merger.
“We see up to 60 per cent valuation upside from synergies in a bull scenario, while leverage should be reduced sharply, providing scope for further consolidation and/or improved shareholder remuneration,” the analysts wrote.
European stocks have seen an improvement
The companies after the close denied they were in talks on a merger or even studying such a project.
Britain’s FTSE 100 index was up 0.7 per cent, Germany’s DAX up 1.6 per cent and France’s CAC 40 up 1.4 per cent, while Italy’s FTSE MIB raced 3.4 per cent ahead, recouping all of last session’s losses.
European stocks have seen an improvement in volumes traded so far in 2014, with European equities seeing a 27 per cent increase in volume in the first quarter compared to same period last year, according to data compiled by Goldman Sachs.
The eurozone’s blue-chip Euro STOXX 50 index was up 1.5 per cent at 3,139.26 points, moving back above its 50-day moving average, sending a positive technical signal.
While the data from China provided a spark for European indexes to rebound from recent falls, investors cautioned that without a rebound in earnings, further gains may be hard to come by.
“The Chinese data is reassuring, but at the same time company results have been quite mixed, just look at ASML. Without good earnings it’s going to be difficult to move higher,” said Arnaud Scarpaci, fund manager at Montaigne Capital, in Paris.
Shares in ASML, the world’s biggest manufacturer of tools for semiconductor chip makers, fell 5.2 per cent after it trimmed its first-half sales forecast, blaming slower second-quarter sales to some customers.
Credit Suisse lost 1.5 per cent after first-quarter net profit fell by more than a third as revenue from bond trading tumbled, raising question marks over its investment banking strategy.