Europe shares halt 3-day slide as Spain and Italy rally

PARIS: European stocks rose in morning trade, halting a sharp
three-day drop as investors started to look beyond Federal Reserve
Chairman's policy speech due later in the day and bet the expected ECB
bond buying plan will ease the debt crisis.
At 0840 GMT, the
FTSEurofirst 300 index of top European shares was up 0.3 percent at
1,081.18 points, after hitting a four-week low at the open.
The
euro zone's blue chip Euro STOXX 50 index was up 0.6 percent at
2,418.11 points, moving back above a key level pierced on Thursday, the
23.6 percent Fibonacci retracement of the market's rally started in
late July.
Fed Chairman Ben Bernanke
addresses a gathering of world central bankers in Jackson Hole, Wyoming
at 1400 GMT on Friday. He has used previous such gatherings to signal
further policy easing.
But investors' focus was already shifting
towards the ECB meeting on Sept. 6, at which the central bank is
expected to give details on its plan to relaunch its government bond
buying programme to help fight the region's economic crisis.
"The
retreat of the last few days shows that expectations surrounding
Jackson Hole have been lowered, and frankly not much should come out of
it. The focus is turning back to Spanish and Italian bond yields,"
Agilis Gestion fund manager Arnaud Scarpaci said.
Friday's gains were led by Southern Europe stocks, with Spain's IBEX rising 0.8 percent and Italy's FTSE MIB up 0.9 percent.
Spanish lender BBVA was up 1 percent while Italian peer Banco Popolare gained 0.9 percent.
European
equities sharply rose in the past few weeks after the ECB signalled it
plans to buy Spanish and Italian bonds to help lower borrowing costs of
the two indebted countries, as well as on expectations of further
stimulus measures from the Fed.
The rally has recently lost
steam, however, as doubts emerged about the details of the ECB plan and
as a slew of better-than-expected U.S. macro data dampened hopes of a
new round of quantitative easing.
"A number of euro zone
countries are reluctant to give the ECB a blank cheque, which could
again limit the central bank's firepower, so things will remain very
tense until Sept. 6," Barclays France director Franklin Pichard said.
Pichard says the market could fall another 2.5 percent, "which would give a nice opportunity to get back into the market."
Around
Europe, UK's FTSE 100 index was up 0.3 percent, Germany's DAX index up
0.4 percent, and France's CAC 40 up 0.6 percent. - Reuters