European shares ended higher on Friday, holding onto gains after US Federal Reserve Chairman Ben Bernanke left the carrot of further stimulus measures dangling. The FTSEurofirst closed up 5.00 points, 0.5 percent, at 1,082.93, paring the previous session's losses and ending the month up 1.9 percent. Volumes spiked in the closing auction as traders closed positions for the month-end.
Investors expectations of imminent stimulus had dimmed somewhat heading into the symposium in Jackson Hole at which Bernanke said the Fed was ready to provide more stimulus if needed, but gave no signal it was imminent. The speech coincided with data showing US consumer sentiment hit a three-month high in August and separate reports on the manufacturing sector painted a mixed picture.
"Bernanke leaves the door open for additional measures but like many central bankers is looking to government to do its part," Oliver Wallin, investment director at Octopus Investments, said. Wallin said Octopus increased its exposure to strategies capable of exploiting a spike in short-term volatility within equity markets, but overall remained cautious, acutely aware that September could prove a crunch month for investors.
The European Central Bank has a policy meeting on September 6 and a German Constitutional Court will rule on the euro zone's permanent bailout fund on September 12, which may affect the ECB's bond-buying plans. There was further uncertainty within the ECB over President Mario Draghi's bond-buying plan after German central bank chief Jens Weidmann's reported threat to resign piled pressure on Draghi to mollify opposition.
"It is difficult to second-guess politicians because there is so much uncertainty and with (recent) volumes so thin the market is as likely to correct as it is to climb higher," Louise Cooper, market analyst at BGC Partners, said. European shares yield around 4 percent, compared with about 2 percent on safer government bonds and near zero for cash.
Banks were among the top gainers with the likes of Spain's Banco Santander and BBVA rising 6.0 percent and 5.5 percent respectively, after the country overhauled its banks for the fifth time in three years. The move was made to secure up to 100 billion euros ($125 billion) in European aid for lenders crushed by bad loans from an extended property market crash.
Traders cited an element of short covering helping the markets' main gainers as the traders tidied up their books for the month-end, with miners among the strongest performers. They had fallen more than 5 percent over the previous five trading days. Miners have taken a hit as worries mount over their earnings outlook. With demand from China waning and with the macro economic outlook bleak, they are not the only companies whose earnings are suffering.
Shares in ADP fell 2.6 percent after the operator of Paris' Charles de Gaulle and Orly airports posted earnings below market expectations. Fifty percent of the companies that have reported in the current earnings season have missed expectations with earnings contracting 11 percent year-on-year, according to Thomson Reuters Starmine data.
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