European shares rose today, bouncing back after sharp falls in the previous session helped by some strength from banks, though traders placed very little faith in a market recovery given persistent concerns about the euro zone debt situation.
"Sell into strength. I think upside is going to remain very very limited until such time as this European problem is nipped in the bud, and I can't see that happening any time soon," said Michael Hewson, market analyst at CMC Markets.Traders had been eyeing a Dutch debt auction today, its first after the ruling coalition collapsed yesterday in a crisis over budget cuts, but the figures appeared to assuage any nerves, and failed to spark any reaction in the bond market.
The FTSEurofirst 300 was up 0.8 per cent at 1,029.43 by 12.24pm, having sunk 2.3 per cent to a three-month low yesterday when political uncertainty and disappointing economic data revived concerns over the euro zone.
"I think we're in this difficult environment between weak macro and strong earnings," said Andrew Milligan, head of global strategy at Standard Life Investments. "I fear we're going to be in for a period of several weeks where political uncertainty is high. Unless there is some quite decisive action by the authorities in Europe I can see European assets being volatile."
In a busy week for corporate earnings, with oil majors Royal Dutch Shell and Total as well as drugmakers GlaxoSmithKline and AstraZeneca among firms set to report, traders said firms' outlooks will fall under scrutiny.
"If you start to see a lot of downgrades to outlooks then really you've got to ask yourself whether or not markets are slightly overvalued," CMC Markets' Hewson said.
However, in a positive sign, Michelin enjoyed its biggest one-day percentage rise in nearly seven months, jumping 7.1 per cent after its outlook reassured investors.
The world's second-biggest tyremaker confirmed its goal for stable sales volumes over the full year as it reaffirmed its 2012 target of a "clear increase" in operating income and positive free cash flow.
Banking stocks, which suffered a 3 per cent drop in the previous session, helped to drive the index's modest recovery today with a 0.9 per cent advance.
Investors were hopeful the US Federal Reserve would inject fresh liquidity into markets, as the US Federal Open Market Committee starts its two-day meeting today.
An announcement on interest rates and any possible further liquidity injections from the Federal Reserve are due at 5.30pm tomorrow.
ARM Holdings was a significant faller, down 2.6 per cent, as its first-quarter results failed to excite, with the chip designer, whose chips are used in Apple's iPad and iPhone, meeting market expectations with a 22 per cent rise in first-quarter profit.
Reuters