European shares stages a modest rebound on Tuesday, led by chip-makers after confident outlook comments from STMicroelectronics raised optimism on the industry.
STMicroelectronics rose 5.2 percent and peer Infineon rose 2.6 percent after STM's chief executive, Carlo Bozotti, told the newspaper Le Figaro it expected growth of 5 to 10 percent this year.
Continue Reading Below
"This guidance confirms the company's positive momentum and signals a recovery in the sector, which brings more visibility," a Paris trader said.
STM led the pan-European FTSEurofirst 300 index, which was up 0.5 percent at 1,213.62 points, while the euro zone Euro STOXX 50 index was up 0.7 percent at 2,766.83 points after closing at a three-week low on Monday.
The Euro STOXX 50 has fallen roughly 2.7 percent from a nearly two-year high hit in late May as investors fretted that the U.S. Federal Reserve may taper off its monetary stimulus programme, which has helped drive a 35 percent rally in the past year.
Trading has become more volatile in the last couple of weeks, with key indices recording daily moves of more than 1 percent, and the VSTOXX index of implied volatility, regarded as a gauge of investor fears of future swings, hitting a 6-week high on Monday.
"The markets are very extended and very nervous," said Lee Robinson, founder of the hedge fund Altana Wealth.
"The price action on a lot of assets has been violent. Could you see a 5-percent-down day on the FTSE or the Euro STOXX in the next four weeks? It's not inconceivable."
In this context, Ronnie Chopra, a strategist at TradeNext, recommended hedging long positions in single European stocks with "shorts" on indices such as France's CAC 40 and Germany's Dax.
Short sellers borrow a security and sell it, betting they will be able to buy it back at a lower price before returning it to the lender, pocketing the difference.
Respectively 63 percent and 58 percent of IG's clients with positions on the Dax or the CAC were short the indices, data from the spread betting firm showed.