European shares rose yesterday, rebounding after a two-day drop, with Fiat rallying on speculation the Italian carmaker could soon launch a buyout offer for its US unit Chrysler.
The medium-term trend is still positive for European stocks with no big negative catalyst ahead
Trading volumes were thin, however, as both the UK and US markets remained closed for a public holiday.
The Euro STOXX 50 index gained 1.1 per cent, at 2,795 points, after suffering a 2.5 per cent drop in two days. Volumes on the eurozone’s blue-chip index represented only 40 per cent of its daily average volume of the past three months.
“We shouldn’t read too much into today’s rise, and I think the pull-back started last week is not over yet,” Saxo Banque senior sales trader Alexandre Baradez said.
“However, the medium-term trend is still positive for European stocks, with no big negative catalyst ahead.”
Eurozone banks featured among the biggest gainers, bouncing back after a 5.6 per cent slide last week, with both BNP Paribas and Banco Santander up two per cent.
Fiat gained 4.4 per cent, boosted by a press report saying the Italian carmaker is in talks with banks to secure financing for a buyout of US unit Chrysler.
Club Med jumped 23 per cent after the French holiday resort operator’s top shareholders, AXA Private Equity and Chinese investor Fosun International, unveiled a buyout offer.
Swiss watchmakers Richemont and Swatch Group added 0.5 percent and 1.1 per cent respectively, rallying after Chinese authorities said import duties on Swiss watches will be trimmed by 60 per cent over the next 10 years.
Around Europe, Germany’s DAX index rose 0.9 per cent, France’s CAC 40 added one percent, Italy’s FTSE MIB rose 1.6 per cent and Spain’s IBEX climbed 1.2 per cent.
Equities saw further inflows last week, according to EPFR Global, with equity funds world-wide seeing $7.49 billion of net inflows.
“A lot of investors who have the impression that they’ve missed the rally of the past 10 months are coming in, which is why we’re seeing strong inflows continuing,” said Edwin Lugo, head of the Franklin European small-mid cap growth fund.
“But at this point, equities in Asia ex-Japan are very expensive, and US stocks are getting expensive, while Europe is still the cheapest market.
“Despite the rally starting last July, the best opportunities are still in Europe.”