European shares inch up

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Paris - European shares rose in early trade on Tuesday, bouncing within a recent tight range as investors await the European Central Bank's policy decision later this week before chasing stocks higher.

Shares in Italian luxury eyewear maker Luxottica bucked the trend as it fell 1.9 percent after long-term chief executive Andrea Guerra stepped down following rifts with chairman and founder Leonardo Del Vecchio and as the group overhauled its top management structure.

“The new governance structure seems overly complex,” a trader said.

At 09:36 SA time, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,380.41 points, while the euro zone's blue-chip Euro STOXX 50 index gained 0.4 percent, to 3,186.85 points.

Euro zone banking stocks featured among the top gainers, with Spain's Banco Popular up 1.8 percent and Italy's UniCredit up 0.9 percent.

“Indexes have been moving sideways following the recent rally, a pattern which is usually followed by further gains. In the short term, European indexes should resume their rise towards June highs,” Aurel BGC analyst Gerard Sagnier said.

European shares have recently rallied following dovish comments by ECB President Mario Draghi, which sparked market bets that the central bank is preparing to pump more liquidity into the system, possibly via purchases of government or corporate bonds, a measure known as quantitative easing (QE).

Sources from within the central bank told Reuters last week that new action at its meeting this Thursday was unlikely but not impossible, and that the barrier to QE was still “very high”.

While most market participants do not expect the ECB to take major easing steps this week, further measures are considered a matter of when and not if in the face of risks to euro zone growth posed by low inflation as well as the Ukraine conflict.

Investors have recently been buying bullish “call” options, ahead of the ECB meeting, with the ratio measuring the number of negative “put” options versus bullish “call” options on the euro zone's blue-chip Euro STOXX 50 index.

STOXX50E dropping in the past three weeks, down to 0.93 currently from 2.45 on August 8.

However, the market also kept a close eye on the recent escalation in the Ukrainian conflict.

President Petro Poroshenko accused Russia of “direct and undisguised aggression” which he said had radically changed the battlefield balance. - Reuters


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