By Sitaraman Shankar
LONDON, May 15 (Reuters) - European shares ended higher on Thursday as commodity and drug stocks gained and economic growth data proved surprisingly strong, offsetting the impact of concerns over more rights issues in the banking sector.
The pan-European FTSEurofirst 300 <.FTEU3> index ended 0.38 percent higher at 1,359.86 points, its third day of modest gains out of the four sessions in the week so far, with the undertone bullish due to strong economic growth data from the region.
The index has now gained 1.7 percent this month, building on a 6 percent gain in April, giving investors respite from a sharp slide that started almost a year ago and stemmed from credit market problems.
Roche Holding <ROG.VX> rose 2.5 percent and Novartis <NOVN.VX> gained 1.7 percent on hopes for key cancer drug trials due to be presented at a research meeting at the end of the month. Much of the information will be available from Friday.
BT Group <BT.L> jumped 5.4 percent after posting strong fourth-quarter results, while Deutsche Postbank <DPBGn.DE> rose 3 percent to top German gainers on talk of takeover interest from insurer Allianz <ALVG.DE>. Allianz and Postbank's owner Deutsche Post <DPWGn.DE> both declined to comment.
Sharp German economic growth and a surge in France produced a healthy showing from Europe when growth estimates for the first three months of the year were published on Thursday.
"It looks as if the European Central Bank will stay on hold. Interest rates and bond yields may now be low enough for risk appetite to ... put equities under upward pressure," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.
"The line of least resistance is upward and I wouldn't be unhappy if, by the end of the year, we had dividend yield plus a small capital gain from equities," he said.
Vivendi <VIV.PA>, Europe's largest entertainment group, jumped 5.2 percent after posting a smaller-than-expected drop in first-quarter operating profit late on Wednesday.
Miners and oil stocks tracked copper and crude prices higher.
Anglo American <AAL.L>, Rio Tinto <RIO.L> and BHP Billiton <BLT.L> all gained more than 2 percent while BP <BP.L> tacked on 0.6 percent.
Across Europe, Britain's FTSE 100 <.FTSE> gained 0.6 percent, while Germany's DAX <.GDAXI> and France's CAC <.FCHI> ended flat.
RIGHTS FEARS HIT BARCLAYS, C. AGRICOLE
Banks, the sector battered worst by a credit market crisis that forced them to take big writedowns and raise capital, were mixed.
Barclays fell 2.2 percent after the British bank took a new writedown and refused to rule out a rights issue in the future, though it held off bolstering equity immediately.
Barclays' asset writedown was smaller than those of some rivals, but its capital cushion remains thin compared with other European banks, especially after Royal Bank of Scotland <RBS.L> and HBOS <HBOS.L> unveiled big rights issues.
"The real crux of the market's interest remains the group's capital position. Today's statement does little to assuage any concerns regarding the likelihood of a rights issue, with the company insisting on keeping the door ajar," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.
Shares in Credit Agricole <CAGR.PA> fell 1.3 percent after France's biggest retail bank confirmed a 5.9 billion euro ($9.1 billion) rights issue and said it would sell assets and restructure its Calyon investment banking arm.
Belgian banking and insurance group KBC <KBC.BR> fell 6 percent after posting a fall in earnings and temporarily suspending its share buyback programme.
But French peer Natixis <CNAT.PA> soared 17 percent after it avoided making a loss in the first quarter.
(Additional reporting by Peter Starck and Amanda Cooper; Editing by Quentin Bryar)
((sitaraman.shankar@reuters.com; +44 207 542 4399, Reuters Messaging: sitaraman.shankar.reuters.com@reuters.net))
Keywords: MARKETS EUROPE STOCKS
(repeats to attach to alerts)
LONDON, May 15 (Reuters) - European shares ended higher on Thursday as gains in drugs and commodity stocks offset the impact of banks, which weakened after Barclays <BARC.L> unveiled writedowns and left the door open for a rights issue.
The pan-European FTSEurofirst 300 <.FTEU3> index ended unofficially 0.3 percent higher at 1,358.74 points, its third day of modest gains so far this week.
The index has now gained 1.7 percent this month, building on a 6-percent gain in April, giving investors respite from a sharp slide that started almost a year ago due to credit market problems.
Roche Holding <ROG.VX> rose 2.5 percent and Novartis <NOVN.VX> gained 2 percent on hopes for key cancer drug trials due to be presented at a researchers' meeting at the end of the month. Much of the information wil be available from Friday.
BT Group jumped 5.4 percent after posting strong fourth-quarter results, while Deutsche Postbank <DPBGn.DE> rose 3 percent to top German gainers on talk of takeover interest from insurer Allianz <ALVG.DE>. Allianz and Postbank's owner Deutsche Post <DPWGn.DE> both declined to comment.
Vivendi <VIV.PA>, Europe's largest entertainment group, jumped 5.2 percent after posting a smaller-than-expected drop in first-quarter operating profit late on Wednesday.
Miners and oil stocks tracked copper and crude prices higher.
Anglo American <AAL.L>, Rio Tinto <RIO.L> and BHP Billiton <BLT.L> all gained more than 1.7 percent while BP <BP.L> tacked on 0.6 percent.
Barclays was 2 percent lower, with banks broadly weaker.
(Reporting by Sitaraman Shankar)
((sitaraman.shankar@reuters.com; +44 207 542 4399, Reuters Messaging: sitaraman.shankar.reuters.com@reuters.net))
Keywords: MARKETS EUROPE STOCKS/CLOSE
By George Matlock
LONDON, May 15 (Reuters) - Interest rate-sensitive two-year euro zone government bond yields remained at their highest level since late 2007 on Thursday, with investors preoccupied by stronger than expected German economic growth.
There was some bond-friendly data from the United States, although this appeared to have more of an impact on Bund futures than cash issues.
The New York Fed's manufacturing survey business conditions index tumbled to minus 3.23 in May from positive 0.63 in April compared with a forecast for unchanged.
U.S. initial weekly jobless claims were slightly higher than forecast, and later U.S. industrial output was reported to have declined by more than expected.
"With all this bond-friendly U.S. data, by the time we got to the Philadelphia Fed business survey, which declined by less than expected, no one really cared to know. Bond (futures) had decided to hang in there with pared losses," said a trader in London.
At 1510 GMT, two-year yields <EU2YT=RR> were 10.2 basis points higher at 4.01 percent. Earlier, the yield marked 4.051 percent, its highest level since December 28.
The 10-year Bund yield <EU10YT=RR> was up 5.6 basis points at 4.227 percent, as the yield curve flattened.
Bond yields move inversely to bond prices.
June Bund futures <FGBLc1> were 55 ticks lower at 113.17, having fallen as low as 112.81 during the session. But earlier in the session they too had marked their lowest levels since Dec. 28 in the wake of the German data and as technical factors contributed to the declines.
Bund prices were pushed deeply south by German data showing German GDP expanded by a larger-than-expected 1.5 percent quarter-on-quarter in the first three months of 2008, while the euro zone flash estimate of first quarter GDP was also a higher-than-expected 2.2 percent.
"Strong German first quarter GDP data was the dominant focus this morning. The breakdown is not available for some time, but the concern about a 1.5 percent gain on the quarter when the underlying news was deteriorating is that it is probably substantially due to seasonal distortions," said Andy Chaytor, a bond analyst at RBS in London.
Late in the session, ECB Executive Board member Lorenzo Bini Smaghi kept up the central bank's anti-inflation rhetoric as he said no one should doubt the bank's primary focus must be inflation.
In supply, France sold 4.59 billion euros of BTAN paper in an auction which analysts said was slightly disappointing. More on [ID:nL15510970]. (Editing by Gerrard Raven) ((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BONDS EURO
--------------MARKET SNAPSHOT AT 1527 GMT------------------
Futures continuous contract basis
FUTURES CASH YIELD
3-MONTH EURIBOR 95.165 (unch) 3.975 (-0.008)
2-YEAR SCHATZ 103.41 (-0.15) 3.992 (+0.084)
10-YEAR BUND 113.30 (-0.42) 4.214 (+0.043)
30-YEAR BUND 88.64 -0.5 4.707 (+0.032)
Current levels versus prior European close
10-YEAR EURO SWAP SPREAD 42
-----------------------------------------------------------
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LONDON, May 15 (Reuters) - European shares ended higher on Thursday as gains in drugs and commodity stocks offset the impact of banks, which weakened after Barclays <BARC.L> unveiled writedowns and left the door open for a rights issue.
The pan-European FTSEurofirst 300 <.FTEU3> index ended unofficially 0.3 percent higher at 1,358.74 points, its third day of modest gains so far this week.
The index has now gained 1.7 percent this month, building on a 6-percent gain in April, giving investors respite from a sharp slide that started almost a year ago due to credit market problems.
Roche Holding <ROG.VX> rose 2.5 percent and Novartis <NOVN.VX> gained 2 percent on hopes for key cancer drug trials due to be presented at a researchers' meeting at the end of the month. Much of the information wil be available from Friday.
BT Group jumped 5.4 percent after posting strong fourth-quarter results, while Deutsche Postbank <DPBGn.DE> rose 3 percent to top German gainers on talk of takeover interest from insurer Allianz <ALVG.DE>. Allianz and Postbank's owner Deutsche Post <DPWGn.DE> both declined to comment.
Vivendi <VIV.PA>, Europe's largest entertainment group, jumped 5.2 percent after posting a smaller-than-expected drop in first-quarter operating profit late on Wednesday.
Miners and oil stocks tracked copper and crude prices higher.
Anglo American <AAL.L>, Rio Tinto <RIO.L> and BHP Billiton <BLT.L> all gained more than 1.7 percent while BP <BP.L> tacked on 0.6 percent.
Barclays was 2 percent lower, with banks broadly weaker.
(Reporting by Sitaraman Shankar)
((sitaraman.shankar@reuters.com; +44 207 542 4399, Reuters Messaging: sitaraman.shankar.reuters.com@reuters.net))
Keywords: MARKETS EUROPE STOCKS/CLOSE
LONDON, May 15 (Reuters) - Euro zone government bond futures pared losses on Thursday after the release of weaker than expected U.S. industrial output data.
U.S. industrial output fell by 0.7 percent in April month-on-month and compared with a Reuters poll forecast for a 0.3 percent decline. The March data was also revised to a smaller gain than previously recorded.
The data followed a weaker than expected New York Fed manufacturing survey and slightly higher than forecast weekly jobless claims.
At 1322 GMT, the June Bund future <FGBLc1> was down 42 ticks on the day at 113.30, compared with 113.21 before the output data.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR> was up 4.3 basis points at 3.95 percent, compared with 3.975 percent earlier. ((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BONDS EURO
Next: TABLE-U.S. April industrial output fell 0.7 pct