Europe's top shares crept higher on Wednesday as investors cautiously topped up holdings ahead of a potentially tumultuous weekend when Greece holds fresh elections, with gains seen limited as broader euro zone tensions temper risk appetite.
By 09:36 SA time, the FTSEurofirst 300 was up 1.63 points, or 0.2 percent, at 991.81, having risen 0.7 percent on Tuesday, although overriding nervousness in the market was highlighted by a 1.3 percent rise in the Euro STOXX Volatility index.
“We're seeing tentative gains. It is not quite the calm before the storm but investors are trying to position themselves ahead of the weekend when the fate of Greece could be decided,” Jimmy Yates, head of equities at CMC Markets, said.
Defensive stocks such as drugmakers, including Akzo Nobel AKZO.AS, and food and beverage firms led gainers in an indication of the tepid investor appetite for risk.
UK-listed utility SSE rose 1.3 percent as Exane BNP Paribas reinitiates its coverage on the firm with an “outperform” rating, citing its potential for income growth as an attractive quality.
Also helping sentiment early on were late gains made on Wall Street, which came after a few choice words from a member of the US Federal Reserve stoked hopes of some further monetary easing and raised optimism that central banks around the world will once again come to the rescue soon of the global economy.
“It was only last week that markets had got over excited at the prospect of a global central bank stimulus so traders are taking today's positive open with a pinch of salt,” a London-based trader said.
The FTSEurofirst 300 has broken out of its down trend channel but is down 10.7 percent since mid-March, when Spain indicated it would struggle to meet its austerity targets, and is in bear territory below the 61.8 percent retracement of the LTRO rally that began in December.
Spain remains a real concern with yields on its government remaining too high to be sustainable in the long-term, while the threat of contagion has pushed Italy's yields above the 6 percent level.
Steen Jakobsen, Saxo Bank's Chief Economist, said the debt markets are emitting signs of stress which should be of concern to investors, in particular Spanish and Italian government bonds both trading above their 200-day moving averages.
He said while Greece's election might provide short-term direction for markets - with a win for the pro bailout party potentially boosting equities - focus will quickly switch back to the problems facing the juggernauts of Spain and Italy, therefore any gains will likely be short-lived.
It was not all bad news in Spain and investors continue to reward companies able to surprise on the upside as retail giant Inditex rose 8.4 percent after it defied the debt crisis and grew profits in the first-quarter. - Reuters