European shares post worst weekly loss since November

European shares staged a small technical rebound on Friday, helped by merger activity in the mining sector, but a regional benchmark marked its worst weekly loss since November following weak economic data. Kazakh miner Eurasian Natural Resources Corporation soared 26.2 percent in volume five times the daily average after a co-founder and key shareholder in the group said he was looking to form a take-over bid consortium.
The move was exacerbated by ENRC's small free float, which accounts for just over a fifth of all its outstanding shares. ENRC's stock topped the pan-European FTSEurofirst 300 index, which closed 0.5 percent higher at 1,153.19 points on the day. The index was down 2.4 percent for the week, which was marred by weaker economic data from Europe's growth powerhouse, Germany, as well as yet more forecast-lagging data from the United States.
Private bank M.M. Warburg has reduced its tactical allocation to European shares to a small underweight by selling futures on regional indexes such as Germany's Dax and the Euro STOXX 50 as well as shares in cyclical and financial sectors. "If the trend in economic data goes on we might consider even going slightly underweight in total," said Matthias Thiel, market strategist at M.M. Warburg, which has 44.4 billion euros ($58.08 billion) under management.
"There is still a lot of optimism in the market and that's generally a (reason) why a selloff may be considerable (if data continues to deteriorate)." The Euro STOXX 50 rose 0.8 percent to 2,575.16 points on Friday as short-term technical traders bought back into the index after it bounced off 2,542, a level that had already supported it a week ago.
Philippe Delabarre, an analyst at Trading Central, said the double bounce on the 30-minute chart confirmed that a double-bottom pattern had been formed and that the index was likely to head towards 2,600 by Monday. He also highlighted a "bullish divergence" between the index's nine- and 14- Relative Strength Index indicator, a gauge of momentum. Boosting the Euro STOXX 50 on Friday were banking shares, with Italian lenders among the biggest gainers.
A senior trader in Milan said he had seen flows into Intesa Sanpaolo and UniCredit as investors bought back into the sector, which is a major holder of sovereign debt, in light of falling borrowing costs on Italian bonds, or BTPs. "I think these are bets on Italy given that BTP is doing well and the banks are stuffed with govvies," he said. Intesa ended up 2.9 percent while Unicredit closed 3.6 percent higher.