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08 December 2023

European shares rise on US hopes

By Agencies
Banks, technology and commodity stocks got European stock markets off to a punchy start on Friday, as a speedy agreement on a US economic stimulus package helped lift shares worldwide.

At 0924 GMT, the FTSEurofirst 300 index of top European shares was up 1.1 per cent at 1,345.15 points, adding to a 5.4-per cent leap on Thursday, and tracking sharp gains in Asia.

Banks and oil shares were the top weighted sectors. Standard Chartered rose 2.4 per cent and Commerzbank 2.3 per cent, while BP rose 1.7 per cent as the oil price breached $90 a barrel.

A 2-per cent rise in copper futures lifted stock in miners, with Kazakhmys, Vedanta and Antofagasta up between 3 and 6 per cent.

French bank Société Générale rose 2.5 per cent a day after stunning markets by disclosing a trader fraud that lost it $7.15 billion.

Shares in brewer Heineken rose 1.7 per cent after it and partner Carlsberg agreed a joint cash bid for Scottish and Newcastle, which was up 2 per cent. Carlsberg was up 0.2 per cent.

Global stocks rose after the US Congress and the White House agreed the outlines of a stimulus package that would give 117 million US families a tax rebate. The agreement came less that a week after President George Bush said a proposal was in the works.

Analysts said there were plenty of positives emerging from the United States but expected share volatility in the short term.

"We expect sharp gains and losses in the next few days and weeks," said Heinz-Gerd Sonnenschein, strategist at Postbank in Germany.

"The US has done many things to stabilise the market such as the Fed rate cut, the stimulus package and help for monoline insurers, but all the bad news is not yet out there."

Britain's FTSE was up 1.1 per cent, Germany's DAX up 2.2 per cent and France's CAC up 1.3 per cent.

Recovery after tough start

European shares have lost 12 per cent so far this year, putting January on track to be the worst month for the FTSEurofirst 300 since September 2002.

Investors have been worried by the prospect of a recession in the United States, the world's biggest economy, and problems for bond insurers. which guarantee more than $2 trillion of securities.

"With an interim loss of over 20 per cent from its 2007 high, the European equity market has probably extensively priced in at least a mild recession in the USA," said Gerhard Schwarz, head of Global Equity Strategy at UniCredit in Munich, Germany.

"The sell-off of the last few days has brought equity indices back to very favourable valuations ... initially this will improve the chances of the equity markets stabilising."

The FTSEurofirst 300 gained 1.6 per cent last year after a 16 per cent gain in 2006, and a bull run that began in 2003 has floundered badly in recent months.

Sonnenschein said he expected a shaky first half, with a recovery in the second half.

"There are plenty of bears out there but we expect the DAX to end the year at 9,000 and don't expect a recession in the United States, though there will be plenty of data that brings the topic into discussion."

The DAX was trading at 6,944 points on Friday.

Among other big movers, handset maker Nokia, which rose 14 per cent on Thursday after compelling quarterly results, added a further 4 per cent.

Top beauty group L'Oreal gained nearly 5 per cent after it posted strong full-year sales late on Thursday and said it was confident for 2008.  (Reuters)