European Shares Edge Up Ahead of U.S. Housing Data
European shares edged higher led by retailer Sainsbury on Wednesday, breaking a two-day downtrend as investors positioned for upbeat U.S. housing data in the hope it will provide further evidence of economic recovery.
By 0947 GMT, the pan-European FTSEurofirst 300 index of top shares was up just 0.15 percent at 1,095.08 points after giving up the bulk of its early gains to remain off Friday's 8-month closing high.
On Tuesday the index lost 1.1 percent after concerns about China's slowing economic growth dented investors' on Tuesday, its biggest pull-back in two weeks as appetite for risky assets waned.
"This week's retreat is a sign of normal breathing by the market, and more people are jumping on the bandwagon. The liquidity rally is not over," said Franz Wenzel, head of investment strategy at AXA Investment Managers, which has 512 billion euros ($676.9 billion) under management.
"That said, there are a few signs of 'liquidity fatigue' creeping in, with the probability of QE3 in the United States declining and people starting to discount interest rate hikes by the Fed earlier than the time frame set by the central bank."
Britain's third-biggest supermarket group J Sainsbury led gainers across the index, rising 2.5 percent after it beat forecasts for fourth quarter sales growth after winning market share from rivals.
One indicator of investor appetite for new issues was a jump in Dutch cable company Ziggo, surging in its market debut on the Amsterdam stock exchange on Wednesday after pricing its initial public offering at the top end of its expected range. By 0952 GMT the shares were trading at 21.64 euros well above the IPO price of 18.50 euros.
Looking ahead, investors awaited monthly U.S. existing home sales, due at 1400 GMT. "We see upside surprise potential," said Viola Stork, analyst at Landesbank Hessen-Thueringen.
"Yesterday the construction figures, especially the building permits, came in surprisingly positive ... this would dispel speculation over further easing measures from the Fed. The question is whether and when the monetary watchdogs will abandon their ultra-loose monetary policy."
Around Europe, UK's FTSE 100 index was up 0.2 percent, France's CAC 40 dup 0.5 percent and Germany's DAX index up 0.3 percent.
"Today could be an important day for the DAX," technical analysts at RBS said. "If the index drops below 7,032 points we should prepare for a new low in the 6,970-7,000 range."
The DAX has climbed 20 percent so far this year, outperforming its French and UK counterparts, which are up 13 percent and 6 percent respectively.
Swedish telecoms group TeliaSonera, down 3.7 percent, was amoung the biggest decliners after Finnish state investment firm Solidium said it sold some shares.
Teliasonera's share price is currently pricing in a fall in its earnings per share growth rate of 2.5 percent a year for five years, on a compounded basis, StarMine data to the Tuesday close showed. This compared with a contraction of 5.9 percent for Tele2.