* FTSEurofirst 300 up 0.7 percent
* Telecoms rally on regional network talk
* Bank gains with LLoyds up on UBS upgrade
* UK retailers fall as Sainsbury reports slower growth
By David Brett
LONDON, Jan 9 (Reuters) - Rallying telecom stocks and a
bullish start to the new earnings season propelled Europe's top
shares to fresh closing highs on Wednesday.
The STOXX Europe 600 telecoms index rose 2.6
percent, the top sectoral gainer, with traders citing a
Financial Times report saying top telecommunication firms were
discussing a pan-European infrastructure network to unite
Europe's disjointed national markets as a reason for the rise.
Telecom Italia and France Telecom gained
8.8 and 4.3 percent respectively.
"What the share prices reflect now is a chance that these
companies could reduce their costs by building a single network
across Europe," John Karidis, analyst at Oriel Securities, said.
The report tempted investors back into the worst performing
sector of the past year, when it recorded losses of 19 percent
against a rise of 18 percent on the broad Euro STOXX.
The FTSEurofirst 300 closed up 7.78 points, or 0.7
percent at 1,167.98, surpassing Friday's 22-month closing high,
also helped by a bullish start to the U.S. earnings season after
aluminium giant Alcoa's in-line profits and
Equities are being lifted by the apparent reduction in risk
posed to the macro economy from the euro zone debt crisis and
budget issues in the United States.
"It has been a good start to 2013 and equity investors have
been buying into the idea that we have negotiated the worst case
(macro economic) scenario," William De Vijlder, chief investment
officer for strategy & partners at BNP-Paribas Investment
With perceived macro risk subsiding, Banks have been
the standout performers over the last three-months rising more
than 14 percent and adding 2.3 percent on Wednesday.
Fresh gains were sparked earlier this week by news that
incoming global bank liquidity rules will be softened, giving
the lenders extra breathing space and room to grow profits.
Lloyds Banking Group rose 4.9 percent after UBS
upgraded the UK's part-state-owned lender to "buy" from
"neutral" to reflect the better growth and profitability
UBS also lifted its target prices for Royal Bank of Scotland
and Barclays, while Spanish bank Caixa
topped the European risers, up 11.8 percent.
"We favour stocks that were hammered in the past years, the
cheap ones, the ones with the biggest upside potential. Cyclical
and banking shares, despite their recent jump, still trade at a
30-50 percent discount to growth stocks," Malik Haddouk, head of
global balanced management at CPR Asset Management, which has 21
billion euros under management, said.
Although macro economic concerns have eased as central banks
have stepped in to support the financial system and attempt to
boost global growth, there are that the problems have only been
pushed further down the road rather than being outright solved.
Hedge funds are betting that a rally in U.S. stocks after a
retreat from the "fiscal cliff" will reverse as doubts grow that
politicians are ready to sacrifice party interests to keep the
world's economic engine running, early data showed.
Spain's benchmark IBEX equity index could fall by
more than 10 percent in 2013, with fears over Spain's sovereign
debt problems likely to resurface as the year progresses, said
Mirabaud Securities' Spanish equities analyst Ignacio Mendez.
Central Banks remain acutely aware of the need to continue
to support the economy and the FTSE 100 hit a
four-and-a-half year high while sterling fell to a one-month low
versus the dollar with some betting that the Bank of England
could ease monetary policy in the near term, traders said.
Reflecting unease over the outlook and consumers feeling the
pinch of austerity measures, UK retailers continued to suffer as
Sainsbury's, down 2.9 percent, reported slowing growth.
Food retailing peers WM Morrison, which saw its
trading statement disappoint earlier this week, and Tesco
- which updates the market on Thursday - slid 0.5
percent and 0.7 percent respectively
Worries over the sustainability of earnings and dividends saw
Aviva shed 2.2 percent as Barclays cut its recommendation
on the UK insurer to "underweight" from "equalweight".
"We see positive earnings and dividend momentum as key
drivers for insurance stocks in 2013 and we believe Aviva offers
neither," Barclays said in a note.