* FTSEurofirst 300 up 0.4 percent
* Financials rebound on fresh Spain bailout rumours
* Italian banks lead gains after decent set of results
* Vodafone, E.ON highlight impact of euro zone weakness
By David Brett
LONDON, Nov 13 European shares rebounded late on
Tuesday as a fresh round of trader speculation that Spain may be
close to asking for a sovereign bailout fueled appetite for
The FTSEurofirst 300 closed up 4.81 points, or 0.5
percent, at 1,099.16, bouncing off a low of 1,086.37.
Spain's IBEX index jumped 1.7 percent, but bond
yields eased only slightly, suggesting there was
some scepticism surround the rumours.
"There is talk doing the rounds of a Spain bailout fuelling
the markets, but we have been here before only for nothing to
come to fruition and I am very sceptical," one London-based
Spain's dilemma over whether to become the fourth euro zone
member to take a bailout remains acute as it would mean more
austerity and hardship for its already embattled citizens.
As a result of the talk, banks and insurers
- sectors with the most direct exposure to the euro zone debt
crisis due to their holdings of sovereign debt - rose 1.7
percent and 0.9 percent, respectively.
There was brighter news from within the banking sector too
after Italy's two biggest banks, Intesa Sanpaolo and
UniCredit, delivered higher-than-expected profits and
strengthened their capital bases even as they both set aside
billions of euros against risky loans.
Intesa and UniCredit gained 5.2 percent and 4.4 percent,
respectively, while Banco Popoare Di Milano added 4.6
percent after its own results.
The need for a speedy resolution to Europe's debt crisis was
highlighted in updates from Vodafone and E.ON
, with both firms revealing the extent to which they
are being affected by weakness in the euro zone.
London-listed heavyweight Vodafone fell 2.5 percent, after
it wrote down the value of its business in Spain and Italy by
5.9 billion pounds ($9.4 billion) and lowered its full-year
German utility E.ON was the top faller on the FTSEurofirst
300, skidding 11.5 percent after it said it would review its
outlook for next year, blaming the weak European economy.
The announcement had investors worried across other asset
classes too as the cost for investors protecting themselves
against E.ON defaulting on its debts spiked.
E.ON's revised outlook dragged on peers with RWE
and Centrica, down 1.2 percent and 2.8 percent,
respectively, while France's GDF Suez fell 0.3 percent.
Utilities have underperformed the broader European market
with the sector so far reporting a 7.4 contraction in earnings
year-on-year in the third quarter, compared with an average 19
percent growth across all companies.
Investors continue to shy away from investing in equity
markets with many deeming stocks too risky an asset class to
plough fresh money into at the moment given the gloomy economic
outlook and summer rally.
Abi Oladimeji, head of investment strategy at Thomas Miller
Investment, recommended investors to reduce their equity
allocation in the short term and take shelter in safer
government bonds given the downside risks to the global economy.
"Right now, the global economy is particularly vulnerable to
negative shocks and any sizeable shock could well herald renewed
recessions across the major developed economies," he said.
German analyst and investor sentiment unexpectedly fell in
November a survey showed, as the euro zone crisis weighed on
Europe's largest economy.
Of European companies that have reported earnings so far in
the current quarter 43 percent have missed expectations, while
analysts have cut their forecasts for those firms by an average
2.7 percent for the next quarter.
Emmanuel Cau, a strategist at JPMorgan, said he expected a
possible fall could be on the cards for European shares in the
first quarter of 2013 as analysts continue to cut their earnings
estimates to reflect a worsening macro backdrop.