The Forex Profiteer: European shares rebound, led by techs, miners

Tuesday, August 22, 2006

European shares rebound, led by techs, miners

PARIS, Aug 22 (Reuters) - European shares headed higher early on Tuesday, drawing strength from Asian bourses and a stabilisation of oil prices, while technology stocks, miners and cement maker Lafarge added to the market's momentum.

Lafarge gained 1.5 percent after France's La Tribune newspaper reported that at least a dozen investment funds and an industrial group were studying the potential acquisition of the group's troubled roofing business.

By 0715 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was 0.4 percent higher at 1,362.03 points, closing in on a three-month peak, although the situation in Iran kept a leash on sentiment.

Iran is due to give its reply on Tuesday to a package backed by six world powers that aims to end a nuclear standoff with the West, but Iranian officials said Iran did not accept the key demand to suspend uranium enrichment.

The euro, and the impact of a strong single currency on euro zone exporters, were also in investors' minds, although companies most exposed to foreign exchange variations, such as car makers <.SXAP>, were for the moment rebounding after Monday's weakness.

Other standout movers included Kuoni , up 1.4 percent after the Swiss travel group posted a first-half net profit that beat analysts' expectations, boosted by strong operating performances in all business units.

Also in Switzerland, net profit at Banque Cantonale Vaudoise rose 38 percent, helping to push the stock 2.5 percent higher.

On the macroeconomic front, investors awaited the publication of Germany's ZEW report, French second-quarter gross domestic product data and euro zone industry orders, for clues on the pace and timing of interest rate hikes in the euro bloc.

The ZEW institute's gauge of investors' and analysts' outlook for the next six months, due at 0900 GMT, is expected to have fallen for a seventh consecutive month in August to 12.0 from 15.1 in July, according to the median forecast of economists polled by Reuters.

"The European markets should be looking very carefully at the German ZEW business expectations report today for signs of further cracks in the recent business confidence boom as it should logically have consequences for ECB interest rate expectations," said Bear Stearns strategist Steve Barrow.

"The trouble is that the ECB will simply pay lip service to weak numbers as they only have their eye on inflation risks right now."

Comments from the presidents of the Federal Reserves of Atlanta and Chicago will also come under scrutiny later in the day, as many investors expect these to back expectations that U.S. rates are not going to be raised again next month.