By Blaise Robinson
PARIS, April 1 (Reuters) - European shares surged on
Tuesday, reaching their highest close in more than a month, as
hopes that the worst of a flurry of asset writedowns may be over
sparked a sharp rally in beaten-down banking shares.
UBS <UBSN.VX> was the biggest gainer among European blue
chips, surging 12 percent, after the Swiss bank unveiled a $19
billion writedown to double its losses on subprime-linked
assets, dumped its chairman and sought more emergency capital in
a second attempt to draw a line under its credit market woes.
Germany's Deutsche Bank <DBKGn.DE> gained 3.9 percent after
unveiling more writedowns of its own.
"The worst had been priced in, as the market seemed to have
expected a drop in bank profits worse than the one we saw in
2000-2002," said Francois Chevallier, strategist at VP Finance,
in Paris.
"So the worst of the financial stocks' slump might be behind
us, although we probably haven't seen the worst on the
macroeconomic front."
The FTSEurofirst 300 <> index of top European shares
ended 3.2 percent higher, at 1,302.47 points, its highest close
since Feb. 29.
Strong demand for a share offering by U.S. Wall Street firm
Lehman Brothers <LEH.N> also helped soothe worries over the
impact of a global credit crisis on the banking sector.
The European DJ Stoxx bank index <.SX7P> soared 5.6 percent,
with Banco Santander <SAN.MC> up 4.6 percent, Societe Generale
<SOGN.PA> up 9.5 percent, and Royal Bank of Scotland <RBS.L> up
7 percent.
The market got a further boost after U.S. factory data was
stronger than expected, easing worries over the health of the
world's biggest economy. The Institute for Supply Management
said its March manufacturing index rose to 48.6 from 48.3 in
February, confounding Wall Street forecasts for a dip to 47.5.
But despite Tuesday's jump, the FTSEurofirst is still down
about 14 percent on the year, hit by fears of a U.S. recession
as well as concerns over the impact of the global crisis in the
credit markets, and many analysts doubt the market is back in a
rallying mood.
"Investors are thinking: that's as bad as it is going to
get, and though it's bad, we can digest it. But I would question
those assumptions. Recent history suggests that banks have
followed the end of bad news with more bad news," said Roger
Noddings, UK chief investment officer at HSBC Investments.
The optimism that surfaced during this first session of the
quarter could quickly vanish with the U.S. payrolls numbers on
Friday, which are expected to confirm a downturn in the U.S.
economy, VP Finance's Chevallier said.
"We can't be optimistic about stocks as long as the U.S.
housing market does not stabilise, and the crisis hurting the
banks will continue despite U.S. interest rate cuts," he said.
Around Europe, Germany's DAX index <> ended up 2.8
percent, UK's FTSE 100 index <> up 2.6 percent, and
France's CAC 40 <> up 3.4 percent.
Tech shares were among the biggest gainers, with Nokia
<NOK1V.HE> up 7.3 percent, and rival Ericsson <ERICb.ST> up 4.6
percent.
Infineon <IFXGn.DE> rose 9.4 percent, and STMicroelectronics
<STM.PA> gained 5.5 percent on hopes the industry may be
emerging from a severe slump after Samsung <005930.KS> said it
was considering raising prices.
AstraZeneca <AZN.L>jumped 6.9 percent on a JPMorgan upgrade,
while GlaxoSmithKline <GSK.L> gained 4.6 percent.
Shares in Inditex <ITX.MC> added 6.8 percent as the market
reassessed the Spanish retailer's value on the back of its
positive results on Monday and its upbeat outlook for the year
ahead.
Shares in Friends Provident <FP.L> surged 7.4 percent on
hopes of more bid approaches, extending gains from the previous
session when it rejected a bid offer from U.S. private equity
firm JC Flowers.
(Additional reporting by Sitaraman Shankar in London, editing
by Will Waterman)
