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* STOXX Europe 600 up 0.6 pct
* UK mid-cap index hits record high
* Deutsche Bank climbs to 2-week high
By Atul Prakash
LONDON, Oct 4 European shares advanced on
Tuesday, with Germany's Deutsche Bank hitting a two-week high
following recent steep losses and the world's biggest education
company Pearson gaining after encouraging comments by
Pearson rose 5.6 percent, the top gainer in the pan-European
STOXX 600 index, after Morgan Stanley said the company
was unlikely to issue a profit warning, "meaning the shares
could recover sharply on the Q3 results".
Deutsche Bank rose 2.7 percent to a two-week high. Its
shares had slumped to a record low on Friday before bouncing
back on expectations of a swift deal with U.S. authorities over
a multi-billion dollar penalty.
HSBC said that despite Deutsche Bank's obvious operational
shortcomings, fears over the bank's solvency were overdone.
However, HSBC cut its target price for the bank, forecasting
challenging conditions for the banking environment.
"Deutsche Bank should be well equipped to deal with this
short-term lack of confidence," HSBC analysts said. "We maintain
our 'hold' rating despite the selling pressure on the market as
we believe the fundamentals of the company have not changed."
The STOXX Europe 600 index was up 0.6 percent,
while Germany's DAX, which resumed trading after a
holiday on Monday, was up 0.5 percent.
Britain's domestically-focused mid-cap FTSE 250 rose
1 percent to a record high, while the FTSE 100 index,
dominated by international firms, gained 1.2 percent to 7,063
points - the first time since the mid-2015 it breached the 7,000
mark - helped by a weaker sterling following the Brexit vote.
"The (sterling) depreciation has been orderly thus far and
is delivering the needed boost to UK exporters," Peel Hunt
strategist Ian Williams said.
Among sector movers, BMW rose 2.5 percent and
helped the European auto and parts index to gain 1.7
percent after Exane BNP Paribas raised its target price for the
automaker to 87 euros from 70 euros.
Shares in Intertek rose 4.5 percent after Jefferies raised
its stance on the stock to "buy" from "underperform" and lifted
its target price to 4,300 pence from 3,000 pence.
(Editing by Andrew Heavens)