* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 gains 0.6 pct
* Carrefour, AB Foods surge after sales figures
* Fall in correlation marks return of stock-picking - C.
* Natixis, BofA-ML expect rally to continue
By Francesco Canepa
LONDON, Jan 17 European sales rose on Thursday
as upbeat U.S. economic data and encouraging sales figures from
retailers Carrefour and Associated British Foods
offset losses in the mining sector.
Corporate updates were the main driver on Thursday, with AB
Foods, owner of discount retailer Primark, and supermarket
Carrefour rising 6.1 percent and 3.2 percent, respectively, in
brisk volume after they reported reassuring figures for the end
"Investors are starting to judge stocks based on their
fundamentals, as opposed to macro factors," Mark Buchanan,
director of trading strategy at Credit Suisse, said.
"Correlations and volatility have fallen, which
suggests...individual stock picking is becoming fashionable once
The average correlation between euro zone blue chips in the
Euro STOXX 50 index and implied volatility on the
index have fallen sharply since the second half of 2012 as a
Euroepan Central Bank pledge to save the euro allayed the
spectre of economic disaster in the common currency's area.
The Euro STOXX 50 rose 0.6 percent to 2,718.93 points on
Thursday while the pan-European FTSEurofirst 300 index
rose 0.5 percent to 1,165.54 points.
The indices extended gains in the afternoon after upbeat
economic data from the United States, where the number of new
applicants for unemployment benefits fell to a five-year low
last week, and groundbreaking for homes rose to the fastest pace
in four years last month.
"Today's unexpectedly strong...numbers will reassure markets
that the U.S. economy is robust enough to withstand this month's
rise in payroll taxes," Dominic Rossi, global chief investment
officer for equities, Fidelity Worldwide Investment, said in a
"These figures provide a significant tailwind for equities
and justify the market's renewed strength."
The data helped basic resources shares, which depend
on global economic activity, cut losses in late trade.
The sector, which closed 0.6 percent lower, was the worst
performer after miner Rio Tinto recorded a $14 billion
The FTSEurofirst 300 was still stuck in the 1 percent range
that has trapped it for the past week, as the index consolidated
22-month highs, but investors were still expecting new gains
"This consolidation is healthy to make the uptrend more
robust," a trader in Milan said.
The index has risen nearly 23 percent since June as
bond-buying programmes by some of the world's' largest central
banks have driven down bond yields and pushed investors towards
assets offering higher returns, such as equities, despite still
negative earnings growth.
"The strength in equities is not about earnings growth,
really, it's about liquidity," Yves Maillot, head of European
equities at Natixis Asset Management, which has 287 billion
euros ($383 billion) of assets under management.
"(One) can't rule out a correction in the short term, but if
you look at the market in the past week, it's struggling to pull
back a bit after such gains, which tells a lot about inflows."
His views were echoed by strategists at Bank of America
Merrill Lynch, who said the rally may need a pause before
picking up the pace again.
They flagged that some of the equity markets that led the
surge - such as Germany's Dax, which is up just 0.6
percent since Jan. 3 - have started to slow down and recommended
watching out for any sign of fatigue in Japanese real estate and
small-cap stocks for signs that a pullback may be imminent.
"Bullish sentiment does not guarantee a correction, but the
current level of optimism does raise the risk of a pullback in
coming weeks," the bank's strategists say in a note.
"Without one, perhaps because investors are unwilling to bet
against Great Rotation, we would be tempted to call for a much
bigger correction in March or April, especially if a resolution
to the U.S. debt ceiling negotiation causes another lurch higher
in risk assets."
On a full-year horizon, however, BofA-ML still expected the
Euro STOXX 50 to rise around 11 percent to 3,000