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Big bounce back for Europe shares
LONDON, England -- European shares took off Thursday as healthy results from Benelux financial group Fortis sent insurance shares soaring with the FTSE making its biggest one-day gain in 15 years. The European equity market tail appeared to wag the U.S. dog for a rare change, sending Wall Street surging, too, but some analysts warned the broad-based rally was only a bounce after prolonged selling. Deutsche Telekom and Siemens were among a host of volatile tech stocks propelling the DAX to one of the year's best performances Thursday as Germany's car giants also drove higher following BMW results. The blue-chip Frankfurt index closed up 6.87 percent or 151.35 points to 2354.31. London's FTSE 100 closed up a hefty 6.08 percent at 3,486.90, while the Paris CAC 40 ended up 6.31 percent at 2,554.71 and the Zurich SMI closed up 3.21 percent at 3,793.30. By 1635 GMT with only Frankfurt still officially trading, the FTSE Eurotop 300 index was up 5.7 percent at 722 points -- its biggest one-day percentage gain since mid-October. It had fallen 3.4 percent on Wednesday to close at its weakest level since mid-December 1996. "For the time being I would characterize this as a savage, bear market rally," Richard Champion, a European fund manager at Pavilion Asset Management, told Reuters. "We are cynical about chasing rallies like this." The stock market recovery was backed by heavy volume, however, with advancing shares outpacing decliners by a hefty 20-to-1 margin. The Eurotop 300 has fallen in each of the past three years and is still down nearly 16 percent for 2003. Investors put aside yet more gloomy U.S. data and worries about war as the United Nations Security Council remained deeply divided over a new resolution on Iraq and the chances of averting war seemed to have dwindled to their lowest point yet. The DJ Euro Stoxx 50 index rose 6.3 percent to 1,967 points. "We still have a fairly cautious view on the market at this point," said Saul Henry, a European strategist at UBS Warburg. "We still think there are significant earnings downgrades to come through, and any rally we get over the next few days won't be sustained," Henry said. Fortis rose 23.7 percent to 11.46 euros, though only back to a level seen last Friday, after reporting 2002 profits that beat expectations and maintaining its dividend. The news helped to put the battered insurance sector on a steadier footing, aiding rivals such as Dutch firm Aegon. Aegon rose 17 percent to 7.16 euros, while Dutch financial group ING gained 15 percent to 10 euros. Axa in France rose 13.6 percent to 10.30 euros, while Britain's Prudential gained 10.6 percent to 309.6 pence. Elsewhere in the market, Dutch construction firm Volker Wessels Stevin jumped 56 percent to 19.20 euros after a family shareholder surprised investors by offering to buy the rest of the firm for around 690 million euros, a big premium. Belgian supermarket group Delhaize rocketed 26.7 percent to 15.65 euros after posting batter-than-expected earnings and forecast flat profits for 2003 -- one of the few companies able to make any predictions going forward. The media sector, which crashed to a 10-year low earlier in the week, was lifted by recoveries in Dutch publisher Reed Elsevier, British broadcaster Granada and British information provider Reuters. Deutsche Telekom was up eight percent at 9.87 euros as the stock rebounded from heavy selling earlier in the week, helped by news of better-than-expected results at its Internet unit T-Online. There were some casualties, however. Shares in Anglo-Dutch metals group Corus sank by 33 percent to just six cents in Amsterdam after the group, under pressure to cut debt, announced it would abandon the 750 million-euro sale of aluminium production assets. Shares in French heavy engineering firm Alstom were down 6.6 percent at 1.26 euros amid a batch of broker downgrades after the firm's drastic new rescue plan ratcheted up fears of a cash crisis. Investors looked past the latest batch of gloomy U.S. numbers which showed that retail sales fell by a much bigger than expected 1.6 percent in February. "It seems the U.S. economy hit the mythical wall in February and the markets are struggling to see where growth is coming from. As soon as sales disappoint then the corporate sector will axe headcount," Matthew Wickens, global economist at ABN AMRO in London, told Reuters. An upward revision to January retail sales helped to take the sting out of February's fall, analysts said, adding that poor weather was partly blamed for February's slide, the biggest since November 2001. Strategists said the stock market may now have largely completed its positioning ahead of likely war in Iraq. "This may be the beginning of a market finding the bottom before we go onto a war footing. Maybe the market will rally if we get a benign result, but we would use that to shift into defensive sectors," UBS Warburg's Henry said. Fund mangers were, however, taking no chances. "It's so much a consensus now to have a post-war bounce that I fear it won't happen, but I am slightly positioned for one," said Champion of Pavilion Asset Management.
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