Euro zone shares steady, supported by Spanish, Italian debt sales
* Euro STOXX 50 up 0.1 pct, FTSEurofirst 300 down 0.5 pct
* Banks, Italian and Spanish stocks fuel euro zone
outperformance
* Volatility rises as investors hedge against U.S. default
jitters
By Francesco Canepa
LONDON, Oct 9 (Reuters) - Euro zone shares steadied on
Wednesday, outpacing their British and Swiss counterparts as
successful debt sales in Rome and Madrid boosted banks and
stocks on the region's periphery.
Spanish and Italian stocks rallied after the sales added to
signs of improved sentiment towards the euro zone's struggling
southern economies.
Italy's FTSE MIB index and Spain's Ibex
rose 1 percent and 1.3 percent respectively, outperforming
Switzerland's SMI and Britain's FTSE 100 indexes, down
0.9 percent and 0.4 percent.
Euro zone banks, which are exposed to the region's
sovereign debt through their bond holdings and rely on economic
growth for their core business, rose 1.3 percent, led by Spain's
Caixabank and Portugal's Banco Espirito Santo
.
Italian and Spanish shares have outpaced their European
peers since July as better economic data lured investors to
stocks trading at lower valuation multiples, including banks,
telecoms and utility stocks in the periphery.
The recent rally, however, has made those valuations start
to look full, especially in Spain.
"The outperformance of value stocks is a long-term theme but
there is scope for some short-term profit taking into the end of
the year," said Claudia Panseri, global equity strategist at
Societe Generale Private Banking.
"The fact that the euro zone has climbed out of recession is
in the prices by now, and we're waiting to see an expansion in
earnings."
Panseri has a 3,000-point year-end target for the euro zone
Euro STOXX 50 index, which closed up 0.1 percent at
2,904.73 points.
Analysts polled by Reuters expect the Euro STOXX 50 to hit
3,020 by the end of the year and rise further to 3,125 and 3,253
by the middle and the end of 2014, respectively.
The pan-European FTSEurofirst 300 index fell 0.5
percent to 1,224.71 points, a fresh one-month low, weighed down
by defensive stocks such as Swiss pharma group Roche
and food group Nestle.
Lack of progress in resolving the U.S. fiscal deadlock kept
sentiment subdued and boosted the Euro STOXX volatility index
, which gauges the cost of insuring against future market
swings using options, to a one-month high.
President Barack Obama said he would only negotiate with
Republicans once they agreed to re-open a government in its
second week of shutdown, and raise the debt ceiling with no
conditions.
In this context, investors welcomed news that Janet Yellen
will take over as Federal Reserve chairman from next year, which
bolstered expectations that the U.S. central bank will tread
carefully in unwinding equity-friendly stimulus.
"It's the Yellen effect that has brought financial market
stabilisation," said Oliver Roth, head trader at Close Brothers
Seydler.
