March 8, 2012 / 10:34 AM / 6 years ago

Europe shares rise on hopes for Greek bond swap deal

LONDON (Reuters) - European shares pushed higher on Thursday, with investors betting Greece will be able to pull off a key bond swap and avoid a chaotic default, and also reflecting optimism about prospects for companies with global exposure.

The markets, however, is likely to remain volatile ahead of a deadline this evening on the Greek bond swap offer to private creditors, and also ahead of Friday’s keenly-watched U.S. jobs report.

“This has been the game of anticipation. I think it’s likely to remain volatile but overall ... we would be expecting more upside potential moving into next week,” Luca Solca, global head of European research at CA Cheuvreux, said.

“I think the rally would take shape expanding into higher beta names, we have been expanding into stocks like Commerzbank.”

Commerzbank (CBKG.DE), whose beta of 1.8 suggests it is 80 percent more volatile than the broader market, added 2.3 percent. The banking sector as a whole, whose sovereign debt holdings make it highly sensitive to the fresh twists and turns of the Greek debt saga, added 2 percent .SX7P.

The Euro STOXX 50 index of euro zone blue chips rose 1 percent to 2,469.34 points .STOXX50E, extending gains partly on speculation that China could loosen monetary policy to stimulate economic growth.

After finding support at the 50-day moving average around 2,444 on Wednesday, the Euro STOXX 50 still has around 50 points to climb to reverse a steep sell off seen on Tuesday.

According to technical analysts at Day By Day, the index remains in a correction phase from this year’s rally - which has taken it up 8.7 percent in 2-1/2 months - between 2,398 and 2,495 points.

For some, though, the more upbeat market mood is a reason to start selling. BNP Paribas’ European Love-Panic indicator, designed to track price action attributed to investor sentiment rather than fundamentals, has moved into convincingly positive territory, which the bank interprets as a signal to buy protection against possible weakness.

It recommends a September 2012 options trade known as a “put ladder” on the Euro STOXX 50 at 2,540, 2,200 and 1,950 for a 1.9 percent premium.

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Asset returns in 2012:

link.reuters.com/nyw85s

Euro zone debt crisis in graphics:

r.reuters.com/hyb65p

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The broader FTSE Eurofirst 300 .FTEU3 added 1.2 percent to 1,063.87.

Among individual stocks, companies with global exposure performed strongly, while those relying on domestic consumers suffered as high unemployment led people to tighten their belts, hurting profits.

Belgian supermarket group Delhaize DELB.BR and German consumer goods group Henkel (HNKG_p.DE) fell after posting weaker than expected results. Enel (ENEI.MI), Europe’s most indebted utility, lost 6.3 percent on its plans to cut its dividend and investments over the next five years.

But AB InBev (ABI.BR), the world’s largest brewer, added 3 percent after painting an upbeat outlook for this year as it looks to drinkers outside Europe - in the United States and Brazil - to drive profits.

EADS EAD.PA, who sells jets to clients as far afield as Middle East and China, added 9 percent to lead the FTSE Eurofirst leader board after predicting a “significant” improvement in operating profit for 2012 and posting forecast-beating earnings for 2011.

Few surprises are expected from Bank of England and European Central Bank meetings on Thursday. Both banks are seen leaving interest rates on hold. The ECB is likely to give markets time to absorb last month’s liquidity injections before considering any more such measures.

The next big catalyst for markets is likely to be the U.S. non-farm payrolls report on Friday. Wednesday’s private sector employment data boosted expectations of a strong number, with the next clue coming from the weekly jobs numbers at 1330 GMT.

Consensus is for 210,000 new jobs to have been added in February. If the actual number is 100,000 higher, the Euro STOXX 50 index could add 0.7 percent shortly after publication of the report, according to Societe Generale research.

However, based on long-term fair value, the bank also says that the consensus reading for the jobs number is in-line with a Euro STOXX 50 value of around 2,400 points, a bit below current levels.

Reporting By Toni Vorobyova. Editing by Jane Merriman

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