Eurostocks end quarter strongly
March 28, 2002 Posted: 12:17 PM EST
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| Traders at the Frankfurt Stock Exchange |
LONDON, England (Reuters) - European stocks ended a flat quarter on an upbeat note on Thursday as data showed continued recovery in the world's top economy, but doubts about profits kept markets trapped in their four-month trading range.
A rally in Italian banks, firm oil stocks on the back of six-month high crude prices, and basic producers lifted by higher gold and copper prices sent benchmarks surging.
Shares in Dutch chip equipment firm ASML jumped to nine-month highs after a key customer said it would spend more.
Dealings were generally light in the last session of the quarter ahead of the Easter market holiday Friday and Monday. Wall Street is also closed on Friday.
The successful market debut of French motorway caterer Autoroutes du Sud de la France, up 11 percent from its offer price, epitomised for many the steadier investor nerves.
At 1630 GMT with most bourses shut, the FTSE Eurotop 300 index of European blue chips was up 0.9 percent at 1,277 points.
"The first quarter was disappointing because at the beginning of the year most people expected more upside than we got," said Alia Baig, head of European equities at Axa IM fund.
The Eurotop 300 is up just 1.2 percent for the year, and still in a trading range set in November as improving economic numbers are countered by doubts that profits will also recover.
"In terms of going forward, the key is earnings visibility for the second half. We are looking for disappointing first quarter numbers from most people, but we are hoping for signs of a pick-up or bottoming in terms of outlook statements from most companies," Baig said.
The Euro Stoxx 50 index of euro zone blue chips rose 1.4 percent.
On Wall Street, the Dow Jones industrial average was up 0.2 percent, while the tech-rich Nasdaq Composite had gained 0.9 percent.
Italian banks jump
Healthcare was propped up by a 3.6 percent gain in France's Sanofi-Synthelabo after a slew of good news for two of its high profile drugs.
Top cosmetics maker L'Oreal, which has a near 20 percent stake in Sanofi, was up 3.2 percent.
Italian banks were boosted after Goldman Sachs investment bank raised its weighting on them to "overweight" from "neutral."
Adding to the bullish tone, shares in Italy's biggest bank IntesaBCI leapt 10 percent after it appointed a new co-chief executive, Corrado Passera, who turned around the Italian Post Office.
In the technology sector, shares in ASML leapt 6.8 percent after Taiwan Semiconductor Manufacturing Co (TSMC) said it would raise capital expenditure from $1.6 billion to $2.5 billion this year, the first major increase by any chip company.
Taiwan's biggest chip maker will build four new semiconductor plants to the two already under construction.
"ASML, as the sole supplier of lithography tools to TSMC, should benefit substantially," JP Morgan bank said.
JP Morgan raised its 2002 EBIT (earnings before interest and tax) forecast for ASML from a loss of 49 million euros to a 22.6 million euro profit.
Shares in Philips Electronics, TSMC's largest shareholder with about 30 percent, rose 3.5 percent.
Cyclicals swing
Oil stocks made headway as the price of crude surged towards the $26 a barrel mark, helping the DJ Stoxx energy index add 1.5 percent.
Mining stocks gained on their cyclical attractions and as gold prices breached the critical $300 an ounce barrier at six-week highs due to tensions in the Middle East.
Oil sector heavyweight BP added two percent, Anglo-Australian diversified miner BHP Billiton rose 1.5 percent while its peer Anglo American rose 1.7 percent.
Meanwhile Swiss insurer Zurich Financial jumped three percent on continuing talk that its chairman might resign at the company's AGM in May, and ahead of a reweighting upwards in the Swiss blue chip SMI index at the close.
British drinks giants Diageo rose three percent after several banks reacted positively to its investor conference, held in New York earlier this week.
The stocks advance was underpinned by good news on the U.S. economy which data released on Thursday showed it grew at a revised 1.7 percent annual rate in the final quarter of 2001 -- significantly faster than the 1.4 percent pace previously reported. Economists in a Reuters survey had expected growth to come in at 1.4 percent.
The University of Michigan's final reading on U.S. consumer sentiment for March was also bullish, showing a gain to 95.7 from 90.7 in February. Economists had expected 95.1.
Strategists and funds are now mulling the next quarter.
"We're still overweight in industrial cyclicals even though they've obviously come a long way since September 11," said Michael Quach, European strategist at Credit Suisse First Boston.
"But we're growing more interested in areas like media and transport, areas that should come in to play a little further along the cycle when we see an increase in corporate spending on things like advertising."
Axa's Baig said there was still some scope in economy-sensitive cyclicals which have already risen sharply in anticipation of recovery.
Interest rates are due to rise in the second quarter to dampen enthusiasm for sectors like financials, she added.
The European Central Bank meets next Thursday to discuss euro zone interest rates but is expected to hold off from raising rates until later in the year. The U.S. Federal Reserve next meets in May.
"Selective growth stocks look interesting, but it might be a bit too soon to go into defensives as valuations still look bit expensive," Baig said.
