By Sara Sjolin
LONDON (MarketWatch)--Positive signals from the U.S. housing
market helped boost European stock markets on Wednesday, with major
bourses rebounding a day after inconclusive election results in
Italy stoked fears of political instability in the euro zone.
The Stoxx Europe 600 index rose 0.9% to close at 287.17,
climbing back from a 1.3% loss on Tuesday.
Among stocks showing the biggest moves, shares of Bouygues SA
rallied the most since August 2011 after a well-received earnings
report, while heavyweight banks rebounded from Tuesday's sharp
selloff. Shares of BNP Paribas SA gained 3.6% in France, while
Italy's Intesa Sanpaolo SpA added 1.9%.
"Yesterday was the postelection day and markets had a lot to
deal with. Given the volatility over the past couple of days, you
would expect a quieter day today," said Peter Dixon, strategist at
Commerzbank in London.
"I think there was a feeling in the markets that the Italian
election was a game changer, but I'm not sure I buy into that. In
that sense the market reaction was a little overdone," he said.
For the broader European stock market, gains followed a steep
selloff Tuesday that saw Italian stocks sink almost 5% after murky
election results fueled worries of a fragmented government. A weak
government could make it hard for lawmakers to implement reforms
and deal with its heavy debt load.
The FTSE MIB index jumped 1.8% to 15,827.02 on Wednesday.
Germany's DAX 30 index added 1% to 7,675.83, while France's CAC
40 index gained 1.9% to 3,691.49.
"It is our assessment that it will not be a disaster if Italy
ends up with a government which does not undertake reforms for a
while. What is important is that a new government does not start to
roll back reforms and that it behaves in such a way that investors
can remain confident that the ECB's OMT program will remain in
place," analysts at Danske Bank said in a note.
Italian government debt was also in focus, as the Treasury sold
4 billion euros ($5.2 billion) of new 10-year bonds at a yield of
4.83%, the highest level since October. Traders had feared
borrowing costs could spike above 5%, however.
In the secondary market, the yield on 10-year government bonds
fell 10 basis points to 4.79%.
Investors also took inspiration from Asia and the U.S., where
bourses gained after U.S. Federal Reserve Chairman Ben Bernanke
defended the central bank's quantitative-easing policy. The
chairman said late Tuesday that the benefits of asset purchases
were clear in the current economic environment and he said the
risks were manageable.
Bernanke also testified Wednesday before the House financial
services committee for the second day of the Fed's semiannual
report to Congress on the economy and monetary policy.
Meanwhile, data showed durable-goods orders fell 5.2% in
January, hit by a sharp decline in bookings for commercial and
defense aircrafts.
Pending-home sales rose 4.5% in January to the highest level
since April 2010.
Among the biggest movers in Europe, shares of Bouygues SA
rallied 13%, after the construction company's 2012 profit beat
expectations.
Shares of European Aeronautic Defence & Space Co. jumped
6.5% in Paris, after the company reported double-digit revenue and
profit growth in 2012 due to stronger business activity in its
Airbus division.
And in the U.K., shares of Weir Group PLC advanced 7.3%. The
engineering firm posted a rise in pretax profit and said that it
expects to deliver low-single-digit revenue growth.
Oil firms were also higher, as oil prices headed north. BP PLC
gained 0.6% and Royal Dutch Shell PLC added 1.1%.
The FTSE 100 index closed 0.9% higher at 6,325.88.
Outside the major indexes, shares of online betting firm
Bwin.Party Digital Entertainment PLC soared 8.9%, after New Jersey
Gov. Chris Christie late Tuesday signed a bill authorizing online
gambling in the state.
Shares of Anheuser-Busch InBev NV added 1.3%, as the brewer
reported a drop in fourth-quarter profit, but revenue above market
expectations. Additionally, U.S. beer drinkers have filed a $5
million class-action lawsuit accusing AB InBev for watering down 10
of its beer brands, the law firm running the case said late
Tuesday.
Write to Sara Sjolin at AskNewswires@dowjones.com