* FTSEurofirst up 0.5ercent
* China inflation points to extended policy easing
* Miners rally boosted by China and Alcoa numbers
* Diageo hit by profit taking as defensives fall
By David Brett
LONDON, April 9 (Reuters) - European shares were lifted by
miners on Tuesday, as investors hoped for more accommodative
monetary policy from China after it reported benign inflation
data and as U.S. firm Alcoa reported solid earnings.
The FTSEurofirst 300 was up 5.61 points, or 0.5
percent, at 1,170.40 by 0749 GMT.
The index has found support around its 38.2 percent
retracement level of 1,154, which it struck after three days of
falls last week due to rising euro zone debt tensions and weak
U.S. jobs data.
The mining sector rose 1.9 percent after no.1 metals
consumer China reported lower-than-expected inflation data,
fuelling expectations that its monetary stimulus would stay in
place and help support economic growth, improving the outlook
for demand in the sector.
The sell-off in miners in 2013 on worries over falling
demand and rising prices has seen the sector fall 15.3 percent
in the year-to-date and their 12-month forward price-to-earnings
(PE) ratio fall to 10.6 times compared with around 12 times for
the broader European market.
ENRC, the third most shorted stock on the UK's FTSE
, extended its recent rebound, up 5.5 percent.
Miners are among the most shorted stocks in Europe, with
around 9 percent of the sectors stock available out on loan,
compared with the market average of about 6 percent, according
to data from Markit.
Also helping was U.S. aluminium group Alcoa, viewed
as a leading indicator for the materials sector, which posted
better-than-expected first-quarter profit.
With the economic news flow light in the coming days and
growth anemic in Europe, the U.S. earnings season is likely to
have a bearing on sentiment as investors await evidence that
earnings can be support the market at these levels.
"With expectations once again lowered it may not be too
difficult (to see) these earnings beating expectations," Jawaid
Afsar, sales trader at SecurEquity, said.
"However, we will need to see what companies have to say
about the outlook," he said
In Europe, earnings expectations have been cut by around 1
percent for the full year in the last 30 days, leaving question
marks over the sustainability of the 10 percent gains seen in
European shares since last June.
In that period the PE of STOXX 600 equities have
re-rated to around 12 times, near historic highs, according to
Thomson Reuters Datastream.
The top fallers on Tuesday were mainly defensive firms -
those companies which offer protection in the face of an austere
Defensives have led the index higher this year and some
sectors, such as food and beverage, have re-rated to
around 20 times PE.
Among the top fallers individually was drinks firm Diageo
which fell 1.8 percent.
"Diageo's valuation looks toppy, it has had a fantastic run
in recent weeks, and it looks like just profit taking," said
Ronnie Chopra, head of strategy at Tradenext.
Elsewhere, Airbus parent EADS shed 1.6 percent
after French media group Lagardere sold most of its
7.4 percent stake in a price range of 37.35 euros to 37.45 euros
a share, traders said.