European shares dented by Greek bailout delays

February 17, 2012

European shares recovered in late session to end slightly higher on Thursday as upbeat US macroeconomic figures and news that Greece had moved closer to securing an international bailout prompted investors to return back to equities.

The FTSEurofirst 300 index of top European shares closed 0.1 per cent higher at 1,076.90 points after falling to 1,064.64 earlier in the day.

Media shares, up about 1 per cent, were the biggest gainers, helped by a 2.9 per cent rise in Reed Elsevier which reported a rise in full-year profit.

The FTSEurofirst index spent most of the session in negative territory as Greece faced hurdles in its efforts to secure a bailout.

However, government sources later said the country and its international lenders had agreed on how to achieve budget cuts.

One euro zone official said after the close of the European stock market that the euro zone was putting the finishing touches to a second bailout for Greece, for finance ministers' approval on Monday. Sources also said euro zone central banks had agreed on a Greek bond swap.

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US shares -- the S&P 500, Nasdaq and Dow Jones industrial average -- rose between 0.8 and 1 per cent.

"It's a long, hard struggle, but the general view is that eventually there will be some solution because a Greek default is not in the interest of the euro zone members such as Germany," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

"People don't want to go short ahead of the weekend as some more positive news could emerge from Greece in the coming days. US economic data also helped the market and we could see some modest upward action in the stock market on Friday."

Figures showed US jobless claims unexpectedly fell last week to a near four-year low, while January housing starts came in better than forecast.

The pace of factory activity in the US Mid-Atlantic region gained momentum in February as new orders picked up.

Mouloud Kadem, derivatives trader at Carax, said investors with a longer-term view could buy DAX or Euro STOXX 50 futures as German industry was doing very well and the banking sector was well supported by governments.

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Kadem said investors could also buy call spreads, such as on the Euro STOXX, which is at around 2,469. A good spread could be on DEC. 12, something like buying 2,550/2,800 call spreads.

Ban lifted

Philippe Delabarre, technical analyst at Trading Central, was bullish on the Euro STOXX 50, which recovered from lows to trade 0.2 per cent lower at 2,489.35 points.

"The confirmation of a bullish continuation pattern in symmetrical triangle could trigger a measured move up towards 2,585 points. Furthermore, prices are supported by an ascending trend line and the 20-day simple moving average."

He said 2,585 was the target of a symmetrical triangle shaped between December 6 of last year and January 17 of 2012. He suggested a stop-loss at 2,385.

Charts also showed the STOXX Europe 600 Banks could be in for a rally, given its break above 150, and with robust trading volume an indication of investor confidence.

Valerie Gastaldy, head of Paris-based technical analysis firm Day-By-Day, said the index was now eyeing a strong resistance line at 180, a low reached in mid-2010 and a level at which -- last summer -- there was a lot of volatility.

Despite a late recovery in several stock indexes, Spanish shares, especially banks, remained under pressure after a ban on short selling in financial stocks was lifted.

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