June 5, 2012 / 7:11 AM / 5 years ago

European shares extend recovery, bet on stimulus

LONDON, June 5 (Reuters) - European equity markets extended gains into a second day on Tuesday, with investors lured by beaten down valuations and expectations that global policymakers could soon act to stimulate economic growth.

A telephone call between the finance chiefs of Group of Seven industrialised nations on Tuesday, a European Central Bank meeting on Wednesday and a speech by U.S. Federal Reserve Chairman Ben Bernanke were all seen as positive catalysts for policy action after a recent run of weak global economic data.

The Euro STOXX 50 index rose 0.7 percent in early deals to 2,094.99 points, adding to Monday’s 0.5 gains and continuing its recovery from an eight month trough of 2,050.16 set last week.

“Yes, there has been some bounce and I think that’s fair because valuation is very compressed ... If I was a long only manager I would be adding to my risk now,” said Steen Jakobsen, chief economist at Saxo Bank.

“But the tail risk remains with Greece, it remains with Spain and recapitalisation of banks so you could still risk 10-20 percent on the downside.” (Reporting By Toni Vorobyova)

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