* FTSEurofirst 300 up 0.3 percent
* VSTOXX implied volatility lowest since March
* Banks underperform on French downgrade, Italy concerns
By Toni Vorobyova
LONDON, Nov 20 European equities edged higher on
Tuesday, building on the previous session's strong gains and
bolstered by expectations that euro zone finance ministers will
approve the next tranche of bailout cash for Greece.
Top officials signalled they were hopeful the Tuesday
evening meeting would result in a solution, avoiding a fresh
escalation of the euro zone crisis and the threat of bankruptcy
for Athens. However, issues remain and a deal on debt reduction
may be subject to more negotiations.
"It's just short covering ahead of this evening's meeting of
EU finance ministers," said Markus Huber, trader at ETX.
"They have basically promised that they would find a
solution ... It's a typical pattern. Ahead of the meetings you
always go up, and then they usually disappoint and we come back
the next day."
The FTSEurofirst 300 closed up 0.3 percent at
1,094.46 points, with its rebound from a session low of 1,087.08
points also supported by stronger than expected U.S. housing
starts data and gains on Wall Street.
The EuroSTOXX 50 added 0.6 percent, building on the previous
session's 2.8 percent rise and touching its highest levels in
nearly two weeks. The VSTOXX index of implied volatility on the
euro zone blue chips fell to its lowest level since March,
pointing to improved investor risk appetite.
Low volumes, however cast doubt over the conviction of the
rally, with just 84 percent of the average 90-day daily volume
traded on the FTSEurofirst 300.
Notable exceptions were Xstrata and Glencore
, which added 1.6 and 3.1 percent, respectively, in
around tripple the usual volumes after Xstrata shareholders
backed their merger.
Banks underperformed, falling 0.5 percent after
Moody's downgraded the French sovereign rating and rekindled
concerns about the health of Italian financials.
The Italian banks index lost 1.4 percent,
hurt by Moody's reiterating its negative outlook on the sector
and by news the Bank of Italy had told domestic lenders to make
adequate provisions for rising bad loans.
Analysts have cut their 2013 earnings forecasts for European
financials by 3.2 percent in the past 30 days, according to
Thomson Reuters Starmine SmartEstimates, making it the third
worst performing sector after energy and information technology.
For STOXX 600 as a whole, forecasts have been cut by 2.1
percent, though earnings are still seen up 9.5 percent next year
- a figure deemed far too high by top-down strategists
"Earnings are being marked down increasingly aggressively
for the moment ... that is a headwind for the market," said
Daniel McCormack, strategist at Macquarie.
He forecasts 3 percent earnings growth for European
companies next year - less than a third of the rate implied by
bottom-up forecasts but, according to him, still stronger than
what is factored in by historically low valuations.
"I think 2013 will be a good year as whole, but at the
moment the market looks a bit wobbly," McCormack said.