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European shares edge higher ahead of U.S. GDP

Published 10/29/2009, 08:17 AM
Updated 10/29/2009, 08:24 AM
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* FTSEurofirst 300 up 0.3 percent after hitting 3-week low

* Financial stocks among top gainers

* Energy shares slip after Shell, Eni results

* For up-to-the-minute market news, click on

By Atul Prakash

LONDON, Oct 29 (Reuters) - European shares edged higher on Thursday ahead of keenly-awaited U.S. gross domestic product data for the third quarter, with banks rebounding after sharp drops in previous sessions and miners following firmer metals.

At 1133 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 983.25 points after hitting a three-week low of 974.50 points earlier. The index, which slumped 45 percent last year, is up 18 percent in 2009 and has surged 52 percent since hitting a record low in early March.

Financial stocks were among the top gainers, with Standard Chartered, HSBC, Barclays, Lloyds and Royal Bank of Scotland rising 1 to 11 percent.

"Market bulls will be hoping that the release of the U.S. GDP figures may be the catalysts for another leg up," said John Murphy, analyst at ODL Securities.

All eyes will be on the United States later when the first estimates of third-quarter economic growth are published at 1230 GMT. Economists estimate the U.S. economy grew for the first time since the second quarter of 2008, though recent data have led them to trim their estimates.

Shares in Belgium's KBC surged 13.5 percent after tumbling for three consecutive sessions following ING's announced capital increase and the spin-off of its insurance business. The EU-imposed break-up and retrenchment of Dutch ING sparked fears that others could face tougher-than-expected sanctions in return for state aid. ING shares rose 5.8 percent.

Some of the world's leading banks warned that bad debts could rise further in Europe next year, overshadowing an improvement in underlying earnings.

Deutsche Bank reported a profit in all of its divisions, but provisions for credit losses more than doubled year-on-year to 544 million euros. Its shares rose 1.7 percent.

Standard Chartered, based in the UK but focused on Asia, said it was benefiting from growth across its businesses, but warned the economic outlook was still fragile.

Miners got strength from higher metals prices. BHP Billiton , Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.1 to 3.3 percent.

"It is not healthy that all global asset classes appear to be hanging on for one apparently key data item from the U.S. It is indicative of a market that is beginning to run out of ideas," said Jim Wood-Smith, head of research at Williams de Broe, referring to the U.S. GDP data.

OILS UNDER PRESSURE

Energy shares came under pressure after oil majors Royal Dutch Shell and Eni warned of a slow recovery, highlighting weak energy demand and operational challenges, as their profits slumped.

Shell, Europe's largest oil company by market value, said it was cutting 5,000 jobs to tackle the tough economic environment. Its shares fell 4.5 percent.

Eni fell 2.6 percent after it said European demand for gas and fuels would continue to shrink, and said it was cutting its production target for the year. BP, BG Group, Repsol and Total fell 0.2-2.2 percent.

Volkswagen, Europe's largest carmaker, fell 0.6 percent as it disappointed markets with an 81 percent decline in third-quarter operating profit and reaffirmed its forecast for a full-year drop in earnings.

Swiss drugs industry supplier Lonza slumped 18 percent after it said it will cut about 5 percent of its workforce after order cancellations and postponements forced it to lower earnings targets.

Swiss engineering group ABB AG was down 3.1 percent. It is still struggling to predict when its customers will start spending again after third-quarter orders slumped 21 percent.

(Additional reporting by Joanne Frearson; editing by Elaine Hardcastle)

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