* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 0.6 pct
* Worries over Cyprus bail-out seen capping gains
* Many investors expect Q2 equity market pull-back
* D.E. Master Blenders surges on bid talks
By Sudip Kar-Gupta
LONDON, March 28 European shares rose on
Thursday, buoyed by investors who covered bets against the
market after Cyriot banks reopened as scheduled and by a surge
in coffee and tea group D.E. Master Blenders on bid
The pan-European FTSEurofirst 300 index rose 0.5
percent to 1,189.51 points by midday, recovering from a
three-week low in the previous session, while the euro zone's
blue-chip Euro STOXX 50 index rose 0.6 percent to
Anxiety over Cyprus, whose 10 billion euro ($12.8
billion)bailout package has forced it to tax wealthy bank
depositors, has put a brake on a rally on equity markets since
the start of 2013.
Some uncertainty over the Cypriot situation was removed on
Thursday when the country's banks re-opened for business without
being besieged, although concerns remain about a possible run on
Richard Edwards, who heads trading and research firm HED
Capital, said investors were unwinding "short" positions that
had been betting on a stock market fall.
"There's an element of 'sell on the rumour, buy on the
news'. When a disaster is expected and then it finally occurs,
you cover your short positions," he said.
The problems in Cyprus have reignited concerns about how
unified the euro currency bloc can remain, with southern states
such as Greece, Cyprus, Spain and Italy hit hardest by the
region's sovereign debt crisis, while northern European
countries such as France and Germany fare better.
Edwards favoured Germany's DAX index over Spanish
and Italian equities. The DAX has risen some 3 percent since the
start of 2013, while Spain's IBEX has fallen 3 percent
and Italy's FTSE MIB has declined by 5 percent.
"I would sell any rallies on Spain and Italy and buy any dip
in Germany," he said.
D.E. MASTER BLENDERS SURGES
D.E. Master Blenders leapt 27.5 percent to add the most
points to the FTSEurofirst 300 after it received a 7.6 billion
euro bid approach from its biggest shareholder, Joh A.
"We would envisage a very high chance of a transaction
here," Olive Tree Financial Group analysts wrote in a note.
Despite the weak economic backdrop caused by the euro zone's
debt crisis, equity markets have been supported by expectations
of more merger activity, and by pledges of liquidity support
from the European Central Bank.
A Reuters poll this month showed the Euro STOXX 50 seen
rising to 2,935 points by the end of 2013, while the broader
STOXX Europe 600 index, which was up 0.4 percent at 293.74
points, was seen ending the year at 317 points.
However, many expect the market to drop back in the second
quarter as investors use worries over Cyprus and political
stalemate in Italy to sell shares in order to book profits on
the first quarter's equity rally.
"The Cyprus situation is an enormous howler by the European
Union. I think the market will be sideways to down in the second
quarter. We could see a five to 10 percent pullback," said Toby
Campbell-Gray, head of trading at Tavira Securities.