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Europe markets bounce off lows
LONDON, England (Reuters) -- European stocks rose from six-year lows by midday on Thursday, as investors tentatively dipped toes into equities and U.S. stock futures firmed, while volatile Fortis soared after pleasing results. Gains were broad-based, supported by equities' valuations relative to bonds. Stocks are cheaper compared with bonds than they have been for 30 years, on the basis of dividend yields. "There was a dramatic sell off across Europe Wednesday that may suggest we were entering the final stages of the bear market and may be starting to stabilize at these low levels," said Tim Hogman at Cantor Index. "Investors are buying some of the more robust blue-chips in the hope any short-term losses will be offset by greater long-term gains." Bellwethers such as French utility Suez and Dutch insurer Aegon, which fell sharply on Wednesday, were among the biggest gainers. By 1138 GMT, the FTSE Eurotop index was up three percent at 703.5 with gainers outpaced losers by a seven-to-one margin. The narrower DJ Stoxx 50 rose 3.1 percent to 1,907.9. Benelux banking and insurance group Fortis reported profits that beat expectations, boosting its shares 17 percent. News that the group was maintaining its cash dividend at 0.88 euros a share despite speculation to the contrary and nasty surprises from some of its peers like Dutch insurer Aegon also cheered investors. Fortis peer ING rose 8.3 percent in sympathy. One trillion euros has been wiped off the value of the benchmark FTSE Eurotop 300 so far this year, according to FTSE International, while about 5.3 trillion euros has been wiped off the value of Europe's 600 biggest listed companies since shares peaked in March 2000, according to Bank of America. No convincing signsUsing the latest available data from the European Commission's Eurostat office, that's more than the combined GDP of France, Germany and the UK -- Europe's three biggest economies. Some strategists still advised caution as there were no convincing signs on Tuesday of panic selling which traditionally precedes a sustainable upturn. "There is no sign yet of capitulation in the U.S. market. Without capitulation, there needs to a catalyst -- for example an obviously pro-active (economic) policy response in Europe and Japan or clarity on the Iraq situation; neither is present," said Andrew Garthwaite, a strategist at CSFB. Relative valuations are no guarantee of future price increases either. "The pan-European dividend yield, at a trailing 3.7 percent, is now within a whisker of the pan-European 10-year bond yield," said Kevin Gardiner, another strategist at CSFB. "Unfortunately, if trustees and accountants are advising institutional investors to reduce equity weightings, the yield gap may get still smaller or even reverse." German drugs and chemical group Bayer bucked the trend by falling two percent after it reported a 46 percent fall in 2002 profits and said it faced even more costly lawsuits over its recalled anti-cholesterol drug Baycol. (Bayer's woes) Other standouts included French heavy engineering group Alstom, which dipped briefly below the symbolic one-euro level amid a slew of brokers' downgrades as the group's drastic plans to dump key businesses and issue new stock fueled fears it was desperate to avert a cash crunch. The continuing indecision among the world's major powers at the United Nations Security Council over how to disarm Iraq continued to nag at the back of investor's minds. A vote, originally planned on Tuesday and then pushed into Friday, was likely to be delayed again, according to diplomats attending a late Wednesday U.N. Security Council session that reached no consensus after a chaotic day. Members meet again on Thursday at 2000 GMT on new British proposals that would confront President Saddam Hussein with six harsh tests if he wanted to avoid war. In Asia, markets closed lower Thursday after a volatile day that saw big swings in Japan and South Korea. While Tokyo was cheered by Wall Street's modest rise and prospects of a stock support package from the government, its enthusiasm waned as the day wore on. (Full story) U.S. markets closed higher Wednesday, erasing earlier losses on late day buying after two brutal sessions, but the move was hardly reason to cheer, with stocks still vulnerable to the same Iraq and economic worries that have plagued them for months. Wednesday saw the Dow Jones industrial average (up 28.01 to 7552.07), the Nasdaq composite (up 7.77 to 1279.24), and the S&P 500 index (up 3.46 to 804.19) all closing slightly higher, after having tumbled earlier in the session. (Full story) Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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