Shares rebound as investors look beyond Cypriot woes
European shares snapped a three-day losing streak on Wednesday as investors bought back battered stocks, betting that a funding crisis in Cyprus would eventually be resolved.
Cypriot leaders held crisis talks on Wednesday to avert financial meltdown after rejecting a deposit tax that was one of the conditions for a 10 billion euro European Union bailout.
Finance Minister Michael Sarris was in Moscow, spurring market speculation that Russia could step in with its own resuce to safeguard Russian deposits in Cypriot banks.
Traders said the limited size of Cyprus’s cash requirements meant it was likely a compromise with international lenders would be found, although they cautioned that equity markets would probably remain volatile in the short term.
“In the grand scheme of things it’s still a fairly small amount,» Ronnie Chopra, head of strategy at TradeNext said.
“People don’t want to miss out on the rally. There is still a lot of bullish sentiment especially from the U.S.”
The pan-European FTSEurofirst 300 index was up 0.5 percent at 1,200.42 GMT.
European banks rose 0.5 percent after being among the worst hit earlier this week, and Chopra recommended buying Barclays, up 0.8 percent, after it fell below the 300 pence mark on Tuesday.
He warned, however, that sentiment could turn quickly if news coming out of Cyprus suggested that the island was moving closer to a default. He said if the euro fell back to a four-month low of around $1.28, that would be a short-term sell signal for shares.
Bounce
In early European trade the single currency rose 0.2 percent to $1,29, helping the euro zone blue-chip Euro STOXX50 index, to which it is highly correlated, rise 0.8 percent to 2,693.23.
Nicolas Suiffet, a technical analyst at Trading Central in Paris, said this could be the right time to buy the index.
“The index has entered into a consolidation phase below (its recent peak) at 2,750 but remains supported by a rising trend line drawn from June’s bottom and is now challenging the rising 20-day and 50-day simple moving averages,» Suiffet said.
“The support at 2,660 (Tuesday’s low) is likely to contain any downward move in price.”
He added momentum indicators were also supportive and a rebound was likely from these levels, barring a break below 2,547, the lower end of a bullish gap opened on in November.
[Reuters]
