* FTSEurofirst 300 up 2.3 pct, Euro STOXX 50 up 2.8 pct
* Biggest daily gains in 10 wks follow steep Friday fall
* Heavily-shorted Nokia gains on Lumia demand hopes
By Toni Vorobyova
LONDON, Nov 19 European equities rebounded from
multi-month lows on Monday to post their biggest daily gain in
10 weeks thanks to signs of progress in U.S. talks to avoid a
Leading Democratic and Republican lawmakers voiced
confidence over the weekend that a deal would be reached to
avoid the so-called "fiscal cliff" of some $600 billion of tax
hikes and spending cuts which threatens to plunge the United
States into recession in 2013.
An unexpected rise in U.S. existing home sales for October
added to the brighter sentiment towards the world's biggest
economy on Monday, which has become a significant source of
growth for European companies as their domestic region
"The news about the fiscal cliff over the past few days has
been much more positive," said Donald Huber, portfolio manager
at Franklin Templeton Investments, which has about $750 billion
in assets under management.
"I don't think it's going to be an easy process overall, but
there are a number of possible solutions shaping up, so my guess
is that they're going to work through it."
The FTSEurofirst 300 index provisionally closed up 2.3
percent to 1,091.50 points, while the EuroSTOXX 50 rose
2.8 percent to 2,495.19 points -- both posting their
biggest one-day gain since early September and rebounding from
The rebound comes after EuroSTOXX 50 dipped into technically
oversold territory on the 7-day relative strength index (RSI) on
Friday for the first time in nearly two months.
Then, a big rally followed but ran out of steam after two
sessions, and this time too analysts were doubtful about the
sustainability of the gains unless the fiscal cliff problem is
actually resolved rather than just postponed.
"We had the lows and the market is oversold ... so it is
just short-covering," said Vincent Guenzi, chief strategist at
"That (progress in negotiations) was the catalyst for the
short term gain of the market. That could help the market may be
gain 1 or 2 percent more, but to really have the end of the
downtrend of the last weeks we need something real."
Monday's broad-based rally took all the STOXX 600 sector
indexes into positive territory, led by economically-sensitive
ones like autos, banks, construction,
technology and basic resources.
Healthcare, which is less dependent on economic cycles for
demand, lagged with a rise of 1.0 percent.
Nokia was a top gainer among individual stocks,
with reports of its Lumia 920 selling out in Germany fuelling
hopes of strong demand for the new smartphone.
Shares in the Finnish cellphone maker added 9 percent on
Monday, but are still down 39 percent since the start of 2012.
Nokia is the most shorted company in EuroSTOXX 50, with 19.7
percent of outstanding shares on loan according to data from
Markit, potentially making it vulnerable to sharp short-covering
rallies on any sentiment improvement or positive news.
That gives Nokia a utilisation rate - shares borrowed versus
the total number available for loan - of 93.5 percent, against
just 6.2 percent for EuroSTOXX 50 as a whole.