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European shares gain after Putin comment

Thursday, August 14 16:27:04

European stocks inched higher today, turning positive after Russian President Vladimir Putin made comments seen as conciliatory, though gains were limited by weak German and French economic data.

Data showed Germany's economy suffered a surprise contraction - its first in more than a year - in the three months to June, and France slashed its growth forecasts for this year and next after its economy failed to grow in the second quarter.

The pan-European FTSEurofirst 300 index was 0.2 percent higher at 1,328.24 points, adding to this week's tentative rebound.

The euro zone's blue-chip Euro STOXX 50 index was down 0.04 percent at 3,054.41 points. The index rose as much as 0.6 percent in afternoon trading, before hitting strong technical resistance at around 3,071 points, representing the 38.2 percent Fibonacci retracement of the index's recent two-week slide.

Speaking to Russian ministers and members of parliament in Crimea, Putin said Russia would stand up for itself but not at the cost of confrontation with the outside world. He also said Russia would do everything in its power to end the conflict in Ukraine as soon as possible.

Several traders said the market reacted positively to the comments.

European stocks have tumbled in the past few weeks, with the FTSEurofirst 300 losing as much as 7.4 percent between late June and last week while Germany's DAX dropped as much as 11 percent, knocked by fears of an escalation of the Ukrainian crisis and tensions between the West and Moscow.

"The recent decline in the DAX looks a bit exaggerated, given that the nature of the current sanctions against Russia is not really having a major impact on German companies," said Peter Garnry, head of equity strategy, at Saxo Bank, in Copenhagen.

"For me, the recent plunge in European equities is a good opportunity to increase exposure to the region, and especially to German equities. Today's GDP figure for Germany is weak, but not alarming, and overall global growth is still expected to be around 3 percent this year, so things aren't that bad for equities."

Germany's weak GDP data pushed down German 10-year bond yields, which briefly traded below 1 percent for the first time ever, reflecting bets on fresh stimulus from the European Central Bank. (Reuters)

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