By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets closed out a
volatile trading day with gains on Thursday, as investors digested
fresh data from the U.S. to gauge if it could trigger the Federal
Reserve to taper its stimulus program.
The Stoxx Europe 600 index climbed 0.4% to close at 303.55.
The gain was not enough to recover from a 1.9% loss seen on
Wednesday, when the Organization for Economic Cooperation and
Development slashed the global growth forecast. Over the past week,
stock markets have in general struggled for direction, as investors
search for catalysts to push markets higher, while worrying that
the U.S. Federal Reserve will soon taper its easing program.
"I think the upside for equities look a little limited. Whilst
you would hope to see stronger data coming through the next few
months, it is A) already factored in and B) it could trigger the
Fed to take the foot of the accelerator. A large portion of the
recent rally has been due to markets trading on QE rather than the
real economy," said Peter Dixon, strategist at Commerzbank.
"Many markets are posting double-digit gains for the year to
date, so we had a big rally and there's scope for the market to
give back some of these gains," he added.
Among notable movers in Europe, shares of Allianz SE climbed
2.8% after Nomura lifted the rating on the insurance firm to buy
from neutral.
Banks were also mostly higher. Analysts at Exane BNP Paribas
suggested banking stocks have further to run, arguing that the
sector is one of the most attractive value plays in the market with
an around 20% further upside to fair value. Shares of Intesa
Sanpaolo SpA gained 2%, Credit Agricole SA picked up 1.3% in France
and heavyweight HSBC Holdings PLC (HBC) added 1.1%.
U.S. data
The broader European stock markets trimmed gains in the
afternoon, after data showed the number of Americans who filed for
unemployment benefits rose by 10,000 last week to 354,000,
exceeding the 345,000 level expected by analysts.
Meanwhile, U.S. growth for the first quarter was revised lower
to 2.4% from an initial estimate of 2.5%.
A gauge of pending home sales increased 10.3% in April from the
same month last year, hitting the highest level in three years.
Investors have been closely monitoring data coming out of the
U.S., after Federal Reserve Chairman Ben Bernanke last week said
that an improvement in data could trigger the central bank to start
tapering its asset purchases in coming months. The bank currently
buys bond worth $85 billion a month and analysts have credited the
aggressive easing strategy as one of the main reasons global equity
markets in recent weeks have climbed to multiyear highs.
"So the question now is how the Fed will read today's data? It's
unlikely to change the FOMC's stance of reducing or increasing the
pace of asset purchases and more likely to keep them on hold at the
next policy meeting and provide little or no details on when and
how the central bank will eventually dial back stimulus measures,"
said Ishaq Siddiqi, market strategist at ETX Capital, in a
note.
"For now, it's short-term respite and an opportunity to pick up
stocks battered in the selloff in price-action over the past few
sessions since the Fed's meeting minutes last week," he added.
U.S. stocks traded higher on Wall Street.
On the data front in the euro zone, the European Commission said
the Economic Sentiment Indicator for the region picked up 0.8
points to 89.4 in May.
Movers
Among notable movers, mining firms were on the rise, tracking
metals prices higher. Shares of Rio Tinto PLC (RIO) added 2.5% in
London and Anglo American PLC gained 1.6%.
The U.K.'s FTSE 100 index climbed 0.5% to 6,656.99.
Chip maker ARM Holdings PLC (ARMHY) climbed 1.8%, after analysts
at J.P. Morgan Cazenove said in a note that inventory data looks
supportive of a continuing up-cycle for the sector.
Another chip maker, STMicroelectronics NV added 2.1% in
Paris.
France's CAC 40 index rose 0.6% to 3,996.31.
Germany's DAX 30 index put on 0.8% to 8,400.20.
Outside the major indexes, SBM Offshore NV dropped 2.3%, after
Morgan Stanley cut the oil-services firm to underweight from
equal-weight. Read: Ahead of OPEC meeting, oil-services firms drop
on broker downgrade
Shares of tire maker Pirelli & C. SpA put on 3.1%, after
Goldman Sachs lifted the firm to neutral from sell.
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