* FTSE up 0.3 percent
* Financials, miners rally as "Bazooka" bailout deal eyed
* Retailers fall, UK data heightens recession worries
By David Brett
LONDON Dec 7 Financial and mining stocks
led Britain's top share index higher Wednesday on reports
European leaders were planning a bolstered bailout fund,
although early gains were pared as more woeful UK data
heightened recession fears.
London's blue chip index added 17.37 points or 0.3
percent to 5,586.09 by 1152 GMT, off an intraday high of
The Financial Times reported eleventh hour talks had begun
to create a bigger financial "bazooka" to present to the
European Union Summit on Thursday and Friday.
The UK's benchmark index has gained around 9 percent from
the closing low on Nov. 24, as hopes have built that a solution
to Europe's ongoing debt crisis might be imminent.
Riskier assets such as banks and insurers
, those with most to gain from a successful debt package
as it would shore up confidence in the financial system, have
led the rally.
Insurance buyout vehicle Resolution added 3.8
percent as Deutsche Bank upgraded its rating on the company to
"buy" from "hold", in a review of the European insurance sector.
"Despite continuing Euro uncertainty we remain constructive
on the insurers' efforts to better manage risk and to improve
operationally," Deutsche Bank said.
The mining sector rallied too, having lost around a quarter
of its value in 2011, on the hope that any deal in Europe would
help lubricate the cogs of the global financial system and boost
demand in the sector.
Citigroup remained bullish on European equities, which it
said are poised to deliver returns of 15-20 percent in 2012,
despite a likely recession in the euro zone next year, owing to
cheap valuations, expected policy changes in the region and with
no global recession in sight, although it leaned towards
defensives in selecting favoured stocks.
The brokerage said it favoured industries with international
exposure and low leverage, and was "overweight" on health care,
oil and gas, basic resources, personal and household goods
insurance and food and beverage companies.
Concerns lingered, however, over the performance of the
broader economy and doubts that European politicians would
strike a deal to solve the two-year old crisis.
After S&P warned on Tuesday of potential downgrades en masse
for euro zone nations, a Reuters poll of economists showed
France will lose its AAA credit rating early next year
regardless of last-ditch efforts by President Nicolas Sarkozy to
resolve the euro zone crisis at an EU summit this week,
providing another potential stumbling block for EU leaders
looking for potential investors in a bolstered bailout fund.
In the UK, British industrial output fell at its fastest
pace in six months in October, reinforcing concerns the economy
may be sliding into recession after a string of weak business
Those fears weighed on the retailers, which underperformed
FTSE 100 gains on concerns over the outlook for the sector.
Kesa fell 8.2 percent after the electricals
retailer swung to a fist-half loss.
That followed a shock profit warning in the previous session
from German giant Metro and downbeat economic data
from Europe, with the potential for more falls to come, JPMorgan
says in a note.
"Our cautious outlook on European retail has been reinforced
by a series of profit warnings over the last few weeks," the
bank said. "With three weeks still remaining to Christmas, the
outlook is worsening daily both in the UK and Europe and we
still perceive considerable risk to estimates across the board."
Burberry bucked the weaker trend, gaining 0.8
percent as Liberum Capital started coverage of the luxury goods
firm with a "buy" rating and 1,535 pence 12-month price target.
"Burberry has reached an inflexion point. After more than a
decade of restructuring, the cost of sorting out legacy issues
and investment in a growth platform, is set to fade as both
sales and margins accelerate," said Liberum in a note.
Elsewhere, ICAP dropped 4.8 percent as traders cited
the impact of a downgrade in rating of the inter-dealer broker
by Morgan Stanley to "equal-weight" from "overweight".
Ex-dividend factors clipped 0.43 point off the FTSE 100
index, with AB Foods and Investec both trading
without their dividend attractions.
Investec could also be one of three companies to leave the
FTSE 100 when the latest quarterly reshuffle of the index is
announced after the London market close on Wednesday.
Inmarsat and Lonmin are also expected to be
demoted to the FTSE 250.
Across the Atlantic, the latest weekly mortgage and
refinancing indexes were released at 1200 GMT, with U.S.
consumer credit numbers for October due at 2000 GMT, as
investors search for rays of light in an otherwise gloomy
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Daily European stocks report........................
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FTSE Eurotop 300 index...........................
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Top 10 Eurotop 300 sectors..................
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(Editing by Helen Massy-Beresford)