European equities finished higher for a third straight session yesterday, boosted by financial and retail shares, on hopes the market has seen its worst for the year and is on track for a recovery.
The FTSEurofirst 300 of top European shares ended 0.6 per cent higher at 870.63 points. The index, which slumped 45 per cent in 2008, has gained in eight of past 10 sessions and is up 35 per cent from a lifetime low hit in early March.
Banks added most points to the index, with HSBC rising two per cent, Société Générale up 1.8 per cent, Credit Agricole advancing three per cent and UBS gaining 1.7 per cent.
"There is an increase in optimism in terms of some of the economic indicators that we have been seeing and the market is no longer pricing in the prospect of a further depression scenario," said Henk Potts, equity strategist at Barclays Stockbrokers.
"Confidence has risen quite significantly, not only at the consumer level but also at the business level, helped by a stabilisation of the financial sector," he added.
Data showed the pace of sales of existing US homes rose 2.9 per cent in April, supporting views the three-year housing recession was near a bottom. In Japan, April exports rose for a second month and consumer confidence in France and Sweden improved.
Retailers also gained ground. Morrison, Tesco and Carrefour advanced 1.5-3.9 per cent.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC rose 0.1-0.8 per cent.
In recent sessions, the FTSEurofirst 300 tested and held technical support on the bottom of its uptrend channel extending back to early March, now at 850 points. The top of the channel is currently at 922 points, but the index faces a technical resistance at around 875 - its 200-day moving average.
"It's a sensible conclusion that we have avoided a depression, and while we're admittedly in a deep recession, the terrain we are walking on has stabilised and the macroeconomic data are producing rays of hope for the second half," said Franz Wenzel, strategist at AXA Investment Managers.
But some analysts remained cautious and said they needed to see more evidence before predicting that the market had seen the worst of the financial crisis.
"When a giant like GM is wobbling, it's difficult for everyone to keep their footing. And so it seems the question remains: have we been seeing signs that the global economy is stabilising or has it just been a morale-boosting month for equities?," said Anthony Grech, a market strategist at IG Index.
General Motors said a crucial bond exchange proposal failed to gain enough support and that its board of directors would meet to review the automaker's options, clearing the path for what would be the largest US industrial bankruptcy ever.
And data showed new commercial vehicle registrations in Europe fell 42 per cent in April compared with the same month last year, industry association ACEA said.
Pharmaceutical stocks, traditionally seen as defensives, were among top losers, with AstraZeneca falling 2.1 per cent, Sanofi-Aventis down 1.4 per cent and Shire falling 1.8 per cent.