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Europe soars after touching lows
LONDON, England (Reuters) -- European stocks sprinted ahead on Friday for the second day as insurers and other financials helped bourses bounce from a midweek five-and-a-half year low. The beat-up insurance sector gained 8.7 percent as Swiss Re leapt 13.7 percent, with Germany's Munich Re up 13.2 percent, and French AXA 10 percent ahead. Elsewhere, Swiss industrial group ABB rose 15 percent after selling more assets to trim debt, while German retailer Metro was up 16 percent after describing the third quarter as "very satisfactory." Auto and technology shares shot up, too, in a broad rally as investors, anxious not to be left out, were in no mood to be derailed by the day's mixed economic figures. "This data is not enough to disrupt the rollercoaster corrective rally we are seeing in equities which should last another couple of sessions. Then, when this peters out, we are back to the bear market picture," said David Brown, an economist at Bear Stearns. By 1535 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was up 4.54 percent at 853.22 points, its best daily percentage gain since late July. The pan-European blue chip benchmark was up 3.3 percent on the week, but still down by a third for the year. The narrower DJ Euro Stoxx 50 index gained 4.6 percent as investors bet that much bad news about the economy, earnings, and the threat of war in Iraq has already been priced into stocks. But analysts warned it was too soon in the earnings season to have a clearer outlook on profits, and that economic numbers need to improve. Much of the day's gains were seen due to a technical bounce from oversold levels, short-covering, early gains on Wall Street, and investors switching from low-yielding bonds to stocks. Analysts cautioned the rally was unlikely to last long. "We are in the midst of the third-quarter reporting season and it's quite likely the numbers will meet expectations or be below, so there is still scope for bad news," said Khuram Chaudhry, a strategist at Merrill Lynch. "We have to see hard numbers on economic data showing there is some lift in the manufacturing and services sectors. The other trigger is very much Iraq -- if crude oil comes off significantly that should help the cyclical stocks," Chaudhry said. Next week the technology sector will hog the spotlight as top names like Ericsson, Nokia, Philips Electronics and SAP report. In the United States, tech leaders IBM, Intel and Microsoft unveil scorecards. Meanwhile the day's mixed U.S. economic data was greeted with relief. The University of Michigan's consumer sentiment measure slumped in early October to its lowest level in nine years, while retail sales dropped 1.2 percent in September, more than forecasts. Investors, however, homed in on a 0.1 percent rise in core retail sales that excluded autos. U.S. producer prices also rose last month, signalling the economy was still growing. Europe's ailing banking, insurance and financial shares bounced off the critical list as investors decided that cheap was cheerful in those battered sectors, but analysts advised a selective approach. "I think there is a slight change in sentiment in terms of separating the wheat from the chaff," said Clive McDonnell, European equity strategist at Standard & Poor's, the credit rating agency. "A recovery in the whole sector is not on the cards yet." Financial-related shares made up nine of the top 10 advancers in the European blue chip DJ Stoxx 50 index and accounted for over a third of the broader European market's advance. Better sentiment in Germany's banks helped the broader European sector as short-covering in Commerzbank AG helped send the stock up eight percent, in a third consecutive session of gains as worries abated that it faced an imminent liquidity crisis. Among the day's other standouts, shares in Granada rose nine percent after Britain's biggest commercial television group unveiled plans to buy rival Carlton Communications as the two firms struggle with falling audiences and advertising revenues. Carlton shares rallied more than 13 percent. On Wall Street the Dow Jones industrial average was up three percent at 7,764 points, while the tech-laden Nasdaq Composite also rose three percent to 1,198 points.
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