* FTSEurofirst 300 up 1.9 pct; highest close since Apr 11
* Technology, automobile shares feature among top gainers
* Strong earnings boost equities; market outlook positive
By Atul Prakash
LONDON, April 20 (Reuters) - European shares hit a one-week
closing high on Wednesday as strong earnings boosted auto and
tech shares, with analysts saying stocks were set to post more
gains on attractive valuations and improving economic picture.
A sharp fall in the Euro STOXX 50 volatility index <.V2TX>,
Europe's main barometer of anxiety, to a 40-month low signalled
risk appetite had improved, but experts said the euro zone debt
crisis stayed in the background and could limit gains.
Greek shares <> fell 2.6 percent, while the country's
banking stocks <.FTATBNK> slipped 4.6 percent, with traders
citing market talk that a debt restructuring could be imminent.
A strong majority of economists polled by Reuters said
Greece will have to restructure its debt in the next two years.
Greek and Portuguese bond yields have hit new highs in recent
sessions. []
But the broader market stayed strong, with the FTSEurofirst
300 <> index of top European shares ending 1.9 percent
firmer at 1,137.81 points, the highest close since April 11 and
the biggest one-day percentage gain in nearly five months.
"The underlying economic cycle is still conducive to
corporate earnings growth and the results season is showing that
up," said Ian Richards, European equity strategist at RBS.
"For now, investors want to focus on that central scenario
of robust global growth, further corporate earnings progression,
cheap valuations and the asset allocation story."
According to Thomson Reuters Datastream, Europe's STOXX 600
index <> trades at 10.7 times one-year forecast earnings,
below a 10-year average of 13.6.
Automobile shares topped the gainers' list, with PSA Peugeot
Citroen <PEUP.PA> jumping 4.7 percent after quarterly revenue
beat forecasts. The STOXX Europe 600 Automobiles & Parts <.SXAP>
index rose 4 percent, while Fiat <FIA.MI> climbed 4.6 percent
after saying it had cut its debts. []
Technology stocks were also in demand, with forecast-beating
revenue from U.S. bellwether Intel <INTC.O> boosting chipmakers.
The European tech sector index <.SX8P> rose 2.7 percent, ASML
<ASML.AS> advanced 5.3 percent and ARM Holdings <ARM.L> was up
5.7 percent. []
"There is a push and pull between fear and the positive
earnings that companies are delivering. Long-term we are bullish
on Europe, we think there are a lot of positive opportunities,"
said Randeep Grewal, director of European equities at F&C Asset
Management, which manages 105 billion pounds ($171.6 billion).
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US earnings revisions graphic: http://r.reuters.com/tuc29r
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EARNINGS OUTLOOK
Strong earnings have underpinned the market. According to
Thomson Reuters StarMine, 83 percent of the 70 S&P 500 <.SPX>
companies that have reported first-quarter results have either
beaten or met expectations.
Some fund managers stayed cautious on the stock market's
outlook, but ruled out any sharp decline in share prices.
"The largest part of recovery in earnings since 2009 is
behind us and progress, although positive, will be less easy
from here," said Don Fitzgerald, fund manager of European
equities at Tocqueville Finance, which manages $2.2 billion.
"There are valid concerns regarding sustainability of
margins, commodity price pressures, government finances and the
start of the tightening cycle. Nevertheless, interest rates
remain very low worldwide, particularly in the U.S., and
valuations are not yet stretched. So a severe market correction
is not likely."
Fredrik Nerbrand, global head of asset allocation at HSBC,
said equities looked relatively cheap versus credit, but were
highly exposed to earnings downgrades.
"Sell-side analysts are still looking for significant
improvements in margins and I don't like that," he said, citing
a potential margin squeeze from high oil prices, rising wages in
Asia and waning productivity gains. All of which pointed to a
contraction of forward-looking margin assumptions, he added.
(Additional reporting by Simon Jessop and Joanne Frearson;
Editing by David Holmes)
