By Dow Jones Business News, February 27, 2013, 12:23:00 PM EDT
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'sIntesa 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
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
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