By Peter Starck
FRANKFURT, Feb 18 (Reuters) - European shares rallied on
Monday, wiping out the previous session's losses, lifted by
robust gains for British banks such as Barclays <BARC.L> and
miners, which drew strength from higher metals prices.
The British government's decision to temporarily nationalise
troubled bank Northern Rock <NRK.L>, takeover talk and
expectations of higher dividends fuelled banks, with Barclays up
7.6 percent and Lloyds TSB <LLOY.L> advancing 7.3 percent.
The Sunday Times newspaper reported that Lloyds and Barclays
would likely increase their payouts to shareholders.
In the mining sector, BHP Billiton <BLT.L> and Rio Tinto
<RIO.L> each put on more than 4 percent. Copper prices <MCU3>
rose more than 2.5 percent to $7,970 a tonne and platinum <XPT=>
set a record high $2,107 an ounce.
Energy stocks firmed as oil prices <CLc1> ticked up for a
fourth day. BP <BP.L> rose 2.7 percent, Royal Dutch Shell
<RDSa.L> 2.4 percent and Total <TOTF.PA> 2.1 percent.
The FTSEurofirst 300 <> index of top European shares
closed 2 percent higher at 1,335.30 points, trimming its
year-to-date losses to 11.4 percent. With U.S. markets closed
for the Presidents' Day holiday, volumes in Europe were
moderate.
The benchmark index remains over 18 percent below its
multi-year peak set in July 2007. Many analysts define a 20
percent drop as a bear market and some strategists said Monday's
revival might prove short-lived.
"I'm more inclined to view this as a bounce in a bear
market," said Andrew Lynch, a portfolio manager at Schroders.
"In the coming months, equity markets will be looking for a
bottom which may be equal or even somewhat lower than the one we
have seen recently. Swings will remain violent, both up and
down," ING Investment Management said in a note.
The FTSEurofirst 300 set a year-low of 1,223.36 points on
Jan. 22.
"It's volatile, one day down, another day up. People are
cautious and many are taking a very short-term view," said
Giuseppe-Guido Amato, equity market strategist at German
brokerage Lang & Schwarz in Duesseldorf.
"Today, with the U.S. markets closed, some sellers were
absent from the market," he added.
QATARI BUYING SPREE
Among financials, Credit Suisse <CSGN.VX> rose 3.2 percent,
boosted by an agency report that Qatar had bought shares in the
Swiss bank. Citing the gas-rich Gulf state's prime minister,
Bloomberg News said that Qatar plans to spend as much as $15
billion on European and U.S. bank stocks in the next 12 months.
The DJ Stoxx European banks index <.SX7P> rose 2.5 percent.
"We get days like today where Qatar is buying bank shares,
the market rallies. But the long-term fundamentals are still
pushing us to the downside rather than the upside," said Lynch
at Schroders.
In one example of the woes that have plagued financials
since mid-2007, shares in bank IKB <IKBG.DE> fell 24 percent to
5.12 euros after the release of details of the latest
state-backed rescue package for the German subprime casualty.
"Several uncertainties remain regarding potential additional
losses," UniCredit said, slashing its target price for IKB stock
to 1.80 euros from 6.10 euros.
"The focus this week is going to be on the banks, as
investors scrutinise their results to see if they've put off
balance sheet things that should actually be on balance sheet,
and whether we've actually been led a merry dance," said Justin
Urquhart Stewart of 7 Investment Management.
Among major European banks, Barclays reports on Tuesday,
French bank BNP Paribas <BNPP.PA> on Wednesday, Societe Generale
<SOGN.PA>, the French bank hit by a rogue trading scandal, on
Thursday and Lloyds TSB on Friday.
Among Monday's blue-chip losers, Bayer <BAYG.DE> fell 2.3
percent to 54.40 euros after the German drugs and chemicals
group stopped a late-stage trial of the drug Nexavar in patients
with non-small cell lung cancer, after an independent data
monitoring committee concluded that the study would not meet the
main goal of improved overall survival.
"It is a setback but should not be overstated. Our positive
stance towards Bayer remains unchanged," said DZ Bank analyst
Peter Spengler, who rates Bayer "buy" with a fair value of 70
euros.
(Additional reporting by Sitaraman Shankar and Amanda Cooper in
London; Editing by Erica Billingham)
