Mining Stocks Give European Markets a Boost

European equities rose again on Tuesday, with miners climbing on stronger metal prices after China's factory sector data, while investors bet that the U.S. Federal Reserve might signal fresh measures to support the economy later this week.

Appetite for riskier assets such as equities grew, with the Euro STOXX 50 volatility index , one of Europe's main barometers of fear, dropping 9.3 percent. At 0822 GMT, the pan-European FTSEurofirst 300 index was up 2 percent at 935.00 points after rising 0.8 percent on Monday.

The STOXX Europe 600 basic resources index featured among the top gainers and was last up 3 percent on relief the flash Purchasing Managers' Index (PMI), designed to preview China's factory output before official data is released, did not show a sharper slowdown. It edged up to 49.8 in August from July's final reading of 49.3.

Chilean copper miner Antofagasta was up 3.2 percent after it doubled its half-year dividend following a 54 percent jump in earnings, confident that strong demand in China and a pickup in Japan and the United states would help underpin volatile copper prices.

"Any data that just hints that the world is not ending is going to be well received by the market. We had better-than-anticipated Chinese factory data overnight and some of the corporate results this morning were also good," said Ian Richards, European equity strategist at RBS.

"You have also got a potential catalyst coming through on Friday and the Jackson Hole meeting is going to be in focus for the markets all this week."

Investors are waiting for the Fed Chairman Ben Bernanke's key speech at an annual central bank conference in Jackson Hole, Wyoming to see if he would provide hints for further measures to revive the struggling economy.


Bernanke is expected to acknowledge his disappointment over the pace of growth and could even downgrade his outlook. He could also explain which medicines left in the Fed's cabinet are best suited to fortify the economy.

"There is a lot of hope riding on Bernanke's speech. But we are sceptical of the idea that we will see more quantitative easing," said Darren Sinden, senior sales trader, Silverwind Securities.

"Structural problems remain in both U.S. and Eurozone economies and it's those that need to be fixed which means politicians making hard choices rather than central bankers printing money."

Analysts said that any signal of further Fed support could trigger a rally on Monday, but the sense of relief could be short-lived as macroeconomic indicators were still disappointing markets.

Key surveys showed the euro zone's dominant service sector was effectively stagnant this month after two years of growth while manufacturing activity, which drove a large part of the economic recovery in the bloc, shrank for the first time since September 2009. Growth in business activity in Germany was the weakest in 25 months in August.

Automobile shares were also in demand, with the sector index rising 3.2 percent. BMW rose 4 percent after WestLB raised the stock to "add" from "neutral".

Among individual movers, Swiss bank UBS AG rose 2.9 percent after saying it planned to slash around 3,500 jobs as it seeks to shave some 2 billion Swiss francs from annual costs by the end of 2013.