Eurostocks Fight Back From Early Losses
LONDON (Reuters) - European shares stabilized in early trading Wednesday after a brief dip at the open, as hopes of a takeover of French tobacco group Seita drove consumer cyclical shares higher.
Energy shares also rose as investors bid up Royal Dutch/Shell Group's shares ahead of the company's third quarter results Thursday.
But as rate setting central bank meetings in the eurozone and Britain loomed, equity investors found themselves in the unusual position of rooting for a tightening.
``As it is so widely anticipated it should be bad news if they don't tighten,'' said Alain Bokobza, European equity strategist at Societe Generale in Paris.
``An early tightening, be it European Central Bank or in England... should put downward pressure on long term yields,'' he said, explaining that this will give investors confidence that inflation will be kept under control.
Bourses in France, Britain and Germany were all between 0.13 and 0.32 percent lower.
The Bank of England's two-day Monetary Policy Committee meeting kicks off Wednesday with economists forecasting a 25 basis point hike in interest rates when its decision is announced by midsession Thursday.
Consensus is that the European Central Bank will also hike rates at its Thursday meeting, but economists are split between expecting a 25 or 50 basis point increase.
Bid Hopes Light Up Consumer Cyclical Sector
Trading in Seita was suspended in Paris after it jumped by 15.41 percent following a newspaper report that it had been approached by British rival Gallaher, whose stock also advanced by 1.35 percent. The consumer cyclical sector jumped by 0.53 percent.
Italian electricity Enel fell by 0.49 percent in the second day of trading after its largest-ever public offering, taking it well below its privatization price.
Shares in Britain's General Electric Company rose by 2.22 percent, building on a 5.2 percent gain Tuesday.
The company is expected to be reclassified as an IT stock after the sale of its Marconi unit is completed, which might attract a new pool of investors, analysts said.
French semi-conductor maker STM added to Tuesday's stellar performance with a gain of 3.24 percent. The stock was helped by a record-breaking session on Nasdaq overnight, and a positive outlook on the semiconductor market, traders said.
Dutch airline KLM's shares rose by 2.36 percent after the company posted a 57 percent drop in second quarter fiscal year net profits but said there were signs of better times ahead.
The mood in Europe was also helped by an uptick on S&P 500 futures trading on Globex, which rose by 4.70 points. The Dow fell by nearly 67 points Tuesday, erasing gains of more than 100 points when Europe closed for the night.