(Fixes index volume level in penultimate paragraph)
* FTSEurofirst 300 up 1.2 percent
* Ifo sees biggest rise since July 2010
* Volkswagen drops, cautions on 2013 outlook
By Tricia Wright
LONDON, Feb 22 European shares rose on Friday in
a broad-based rally as investors took advantage of the previous
session's steep falls to pick up equities more cheaply, though
traders cited some caution given weekend elections in Italy.
The FTSEurofirst 300 closed up 1.2 percent at
1,165.58, having sunk 1.5 percent on Thursday as uncertainty
over the U.S. Federal Reserve's future monetary policy was
compounded by disappointing news on the euro zone economy.
Brightening the mood on Friday, data showed German business
morale surged at its fastest pace in over two years in February.
The Euro STOXX 50 Volatility Index, or VSTOXX,
Europe's widely-used measure of investor risk aversion,
retreated from three-month highs hit in the previous session.
"People are looking more relaxed today with the Ifo showing
that at least for the German economy things are moving into the
right direction," Gerhard Schwarz, strategist at Baader Bank,
"I think we are now in a kind of digestion phase going on
for a couple of weeks, and after that I would expect a
resumption of the uptrend."
Investors in Europe have been seeking protection against the
risk that Italian elections next week could produce a political
stalemate that will make fiscal reforms more difficult to
The euro zone's blue-chip Euro STOXX 50 index
firmed 2 percent to 2,630.05, bouncing back off a 2.3 percent
drop on Thursday which took it to a fresh 2013 closing low of
Technical charts painted a gloomy picture. Lynnden Branigan,
technical analyst at Barclays Capital, cautioned that until the
index closed above 2,670, around the 50-day moving average and
recent range high, there is a risk of further weakness.
"Closing below 2,579 would signal a third leg lower off the
Jan highs... Initial supports below 2,579 are at 2,567 and then
2,522," he said.
Among significant movers on Friday, Europe's biggest
carmaker Volkswagen shed almost 7 percent to top the
FTSEurofirst 300 fallers' list after it became more cautious on
its business outlook against a backdrop of declining European
Trading volume in the stock was robust, at more than four
times its 90-day daily average, against the FTSEurofirst 300 on
102 percent of its 90-day daily average.
In the current reporting season, 45 percent of STOXX Europe
600 firms have posted results so far, of which 61
percent have beaten or met forecasts, according to Thomson
Reuters Starmine data.
(Reporting by Tricia Wright; editing by Ron Askew)