Euro shares turn positive as investors eye bargains
EUROPEAN shares turned positive around midday today, bouncing off major technical support levels, signalling that many investors were looking for bargains after a recent dip.
Mining stocks were among the top gainers after being hammered lately, with Rio Tinto up 1.5pc and Anglo American up 1.4pc.
At 1121 GMT, the FTSEurofirst 300 index of top European shares was up 0.2pc at 1,218.83 points.
The benchmark index lost as much as 1.2pc in early trade, testing two technical support levels, its 50-day moving average and the 50pc retracement of its rally from mid-April to mid-May, at 1,204 and 1,201 respectively, before bouncing off the levels.
"With the support levels holding, we saw some buy orders coming in. People are using the pull-back to increase equity holdings," a Paris-based trader said.
The euro zone's blue-chip Euro STOXX 50 index was up 0.5pc at 2,784.28 points, also bouncing off a key support level, the 38.2pc Fibonacci retracement of its rally from mid-April to mid-May, at 2,733.
The session had started in negative territory, with investors on the edge after a late sell-off on Wall Street on Friday, wary about this week's all-important US jobs data - the main barometer for the Federal Reserve's quantitative easing programme.
Also hurting the mood, data showed China's economy lost steam last month, with factory activity shrinking for the first time in seven months while growth in the services sector cooled.
Stocks started to trim losses around midday, however, while US stock index futures gained ground, signalling a positive open on Wall Street on Monday.
"The bulls haven't given up yet. The fact that indexes are around major support levels is prompting a number of market players to get in at these levels," said Guillaume Dumans, co-ahead of 2Bremans, a Paris-based research firm using behavioural finance to monitor investor sentiment.
Around Europe, UK's FTSE 100 index was down 0.1pc, Germany's DAX index up 0.5pc and France's CAC 40 up 0.7pc.
Frederic Jamet, head of management at State Street Global Advisors France, said European stocks remained attractive in both absolute and relative terms, which should help to support the market.
"Despite the gains so far this year, equities are still cheap relative to bonds while economic growth in Europe is expected to be nil. The dividend on European stocks is above bond yields."
The average dividend yield on the Euro STOXX 50 is 3.4pc, well above the 10-year German Bund yield of 1.5pc.