* FTSEurofirst 300 up 0.2 pct
* ECB rate rise expectation knocks sentiment
* Alcatel-Lucent jumps as much as 11 percent on bid talk
* Technical analysts suggest bullish trend intact
By Harpreet Bhal
LONDON, March 3 (Reuters) - Expectations that euro zone
interest rates could rise earlier than forecast rattled equity
investors on Thursday, with shares in peripheral euro zone
states hit hardest on concerns that higher lending rates would
hit the fragile recovery.
However, the wider equity market got support from confidence
in the strength of the U.S. labour market after data showed
weekly jobless claims dropped to a 2-1/2 year low, setting a
positive tone ahead of Friday's keenly-watched non farm payrolls
report. []
A pull-back in crude oil prices <LCOc1> from recent highs
also reassured investors, after Venezuela said the Libyan
government has accepted a proposal for an international
commission to seek a negotiated solution to its crisis.
[]
The pan-European FTSEurofirst 300 <> share index
closed 0.2 percent higher at 1,155.94 points, but dropped from
earlier highs of 1,166.01 points after hawkish comments from the
European Central Bank (ECB) following its monthly meeting.
ECB President Jean-Claude Trichet said the central bank
would exercise "strong vigilance" over rising inflation, adding
that an increase in interest rates in the next meeting was
possible. []
"The market's expectation of interest rates is going to
determine how equities perform in the next few quarters," said
Joshua Raymond, market strategist at City Index.
"It's something that traders are going to have to think
about earlier this year than they would have expected."
SPANISH STOCKS PRESSURED
Spain's IBEX <> index was the biggest faller among its
peripheral peers, down 0.7 percent as concerns grew over the
implications of higher interest rates on the highly indebted
country.
Spanish lenders were on the back foot, with Banco Santander
<SAN.MC> off 1.7 percent.
Conversely, the London market's FTSE 100 <> index
jumped 1.5 percent, underpinned by strength in heavyweight
mining firms as the sector recouped losses from earlier in the
week on reduced worries that higher energy prices would hamper
economic recovery.
Technical analysts said the medium-term outlook for European
shares was still bullish and saw more gains on the horizon for
the euro zone's blue chip Euro STOXX 50 index <>, which
rose 0.4 percent to 2,969.24 points on Thursday.
"As long as prices are managing to stay above this 50-day
moving average line at 2,942 today, and the low-end of the trend
channel at 2,920, I consider this as a consolidation within the
up-trend from its November lows," said Roelof-Jan van den Akker,
senior technical analyst at ING Commercial Banking.
"This should be followed by the next rally phase
indefinitely breaking at the 3,045 resistance barrier confirming
the bullish undertone in the markets."
Gains in technology shares helped the market push higher,
with Alcatel-Lucent <ALUA.PA> rising 6.4 percent, as traders
cited market talk of a potential takeover bid from a Chinese
company. []
Brokers were also bullish on the stock.
"We continue to see Alcatel-Lucent as the best positioned of
a challenged group of companies in the telecoms infrastructure
segment and raise our estimates again," Barclays analysts said
in a note.
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Oil and equities correlation http://r.reuters.com/mut38r
Oil and the Vix http://r.reuters.com/dev38r
Oil price shocks http://r.reuters.com/qes28r
Oil price impact on GDP http://r.reuters.com/jux28r
Inflation graphic package http://r.reuters.com/wuz46r
Middle east unrest http://r.reuters.com/nym77r
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(Graphics by Scott Barber; Editing by Greg Mahlich)
