European shares hit 4-month highs on economic data

                                
 * FTSEurofirst 300 ends 1 pct higher, rises for second day
                                
 * Encouraging U.S. economic data boosts share market
                                
 * Banks among top gainers; risk appetite rises
                                
 
                                
 By Atul Prakash
                                
 LONDON, Sept 9 (Reuters) - European share prices climbed to
their highest in more than four months on Thursday, with
sentiment improving after encouraging U.S. economic data and
banks surging on hopes that new capital requirements for the
sector will not be as tough as feared.
                                
 The VDAX-NEW volatility index <.V1XI>, one of Europe's main
barometer of investor anxiety, fell more than 2 percent and
flirted with a 4-1/2-month low. The lower the index, the higher
is investors' appetite for risky assets.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
finished 1 percent higher at 1,082.26 points after touching
1,083.46, the highest since late April, supported by U.S.
macroeconomic numbers.
                                
 New U.S. claims for unemployment benefits fell more than
expected last week to a two-month low, while the trade deficit
narrowed sharply in July. Analysts said the reports helped to
calm fears growth was slowing sharply. [ID:nN09174403]
                                
 "Perhaps the markets now have come more to terms with the
idea that we will have an ongoing recovery, even if at meagre
rates," said Klaus Wiener, head of research at Generali
Investments.
                                
 "On balance, we can finish the year up compared to where we
are today."
                                
 Financials were among the top gainers, with the Stoxx 600
European banking index <.SX7P> rising 2 percent. Barclays
<BARC.L>, Royal Bank of Scotland <RBS.L>, Societe Generale
<SOGN.PA> and Credit Agricole <CAGR.PA> jumped 3.4 to 5.1
percent on hopes that new Basel III banking rules on capital
requirements will not be as harsh as was thought earlier.
                                
 "The fear as a result of the Basel requirement was a bit
exaggerated. There has been progress regarding recapitalisation
and we think there is sufficiently long time for banks to come
to terms with the new requirements," Wiener said.
                                
 Regulators and central banks are expected to wrap up
discussions about the new capital rules as soon as this weekend,
German Bundesbank President Axel Weber said on Wednesday.
[ID:nLDE6870JP]
                                
 Weber said the new standards will not hinder banks from
lending and will not endanger economic growth.
                                
 Separately the European Central Bank's governing council
member Yves Mersch said the euro zone is on the brink of a
sustainable recovery and the central bank is likely to discuss
removing some support measures at its December meeting.
[ID:nFLA9KE693]
                                
 
                                
 TECHNICAL OUTLOOK
                                
 The Euro STOXX 50 <.STOXX50E>, the euro zone's blue chip
index, rose 1.1 percent to 2,782.43 points, moving further
higher from its 50 percent Fibonacci retracement of a fall from
an April high to a May low at 2,737.62 points.
                                
 The index closed just above it's 200-day moving average of
2,780.94 points. If it manages to stay above the average in the
coming sessions, that would be a bullish sign for the market.
The index faces resistance at around 2,806, its 61.8 percent
retracement level.
                                
 Among individual movers, British retailers Home Retail
<.HOME> fell 2.8 percent after it forecast a 20 to 25 percent
fall in first-half profit and a full-year outcome in the bottom
half of the current analyst range.
                                
 French drugmaker Sanofi-Aventis <SASY.PA>, up 1.4 percent, 
denied a report that it had raised its offer for U.S.
biotechnology company Genzyme <GENZ.O>, saying it was sticking
to its bid of $18.5 billion or $69 a share. 
                                
 In a widely expected move, the Bank of England kept UK
interest rates at 0.5 percent for the 18th month in a row on
Thursday and announced no new quantitative easing purchases.
[ID:nLAC005760] 
                                
 Across Europe, Britain's FTSE 100 <.FTSE>, Germany's DAX
<.GDAXI> and France's CAC <.FCHI> rose 0.9 to 1.2 percent. The
Thomson Reuters Peripheral Eurozone Countries Index
<.TRXFLDPIPU> was up 1.1 percent.
                                
 "With signals that the U.S. economy might not be in quite
the state as some had thought, the bulls may start to wade back
in, especially as cash yields look set to remain static for some
time yet and other safe havens such as gold start to look
increasingly overpriced," said Will Hedden, trader at IG Index.
 (Editing by Greg Mahlich)