European shares recouped early losses to finish steady yesterday after data showing robust factory activity in the US mid-Atlantic region raised expectations that US economic recovery remained on track.
After falling as much as one per cent earlier on concerns about an earlier-than-expected rise in US, rates, the FTSEurofirst 300 index ended 0.06 per cent higher at 1,305.87 points, helped by data from the Philadelphia Federal Reserve Bank showing its business activity index rose to 9.0 in March from -6.3 in February.
Some insurers, including AXA and Aegon, were seen benefitting from the shift in the interest rate outlook and rose 3.9 per cent and 4.2 per cent respectively.
Among other risers, French aerospace and defence supplier Zodiac Aerospace gained 5.4 per cent to sit at the top of FTSEurofirst 300. It said on Wednesday it was ready to make new acquisitions after posting a 9.2 per cent rise in revenue for the first six months of its financial year.
“The worst-case scenario for the global market right now is a soft patch in the United States, but the Philadelphia data supports the idea that we haven’t got one and recent weaker US economic numbers are weather-related,” Graham Bishop, senior equity strategist at Exane BNP Paribas, said.
Sentiment was also boosted by data showing the number of Americans filing new claims for unemployment benefits held near three-month lows last week.
Federal Reserve Chair Janet Yellen said on Wednesday harsh weather had played an important role in the economy’s weakness, but announced further cuts to its bond-buying and suggested the programme could end this fall, with interest rates rising around six months later.
Her comments put pressure on global stocks, with European equities slipping in the morning session before recovering on the US economic numbers. However, investors remained cautious about the market’s outlook in the near-term.
“What makes investors nervous is that it sounds risky for the Fed to unveil a calendar when macro and micro signals are still quite mixed,” said David Thebault, head of quantitative sales trading at Global Equities.
Around Europe, Britain’s FTSE 100 index was down 0.5 per cent, Germany’s DAX index rose 0.2 per cent and France’s CAC-40 was up 0.5 per cent.
European equities have been volatile this month on geopolitical tensions related to Ukraine and concerns about a slowdown in Chinese economic growth, but analysts remained bullish on the market’s longer-term outlook.
A Reuters poll of 37 fund managers and strategists predicted the pan-European STOXX Europe 600 eight percent by the end of this year to a six-year high.
The eurozone’s blue-chip Euro STOXX 50 index was expected to add around six per cent to hit a five and a half-year high.