European shares held near four-month highs on Wednesday with gains in miners and the scandal-hit banking sector outpacing weakness in autos and oils as the wait went on for more central bank action stimulate the global economy. Standard Chartered rose 7.1 percent, having shed 22 percent over the last two days, as the UK lender began its fightback against allegations it broke US sanctions against Iran.
---- Standard Chartered rebounds, leads banks higher
---- Rio lead gains among miners
The FTSEurofirst 300 closed up 1.86 points or 0.2 percent at 1,096.05, inching nearer the 2012 peak it hit in mid-March in light trading. Europe's top shares have rallied 7.4 percent, partly on hopes of central bank stimulus, since ECB President Mario Draghi pledged late last month to do what it takes to preserve the euro. Despite cutting its UK growth forecasts, the Bank of England gave little indication on Wednesday that it would rush to pour further stimulus into the economy.
Investec strategist Edo Brasecke said returns on offer from equities also remained attractive compared with other asset classes. "There are some big corporates out there that are stronger than some sovereigns and if you are a big pension fund and you have to increase your returns you can not put your money in (low-yielding) bonds or cash, so you put your money in big companies," Brasecke said.
The FTSEurofirst 300 currently trades on a below-average PE of 10.7 times and offers a dividend yield close to 4 percent and Brasecke believes that despite earnings lacking upward momentum the market can go higher. Miners, which have lagged gains over the last month, advanced 1.5 percent ahead of a slew of data from top metals consumer China this week which should paint a clearer picture on the extent to which it has been hit by softness in its export markets.
Rio Tinto rose 2.9 percent after the global miner said it would stick to its $16 billion spending plan for the year, even as weaker prices dragged first half profits 34 percent lower. In the banking sector, StanChart won some help from Britain's central bank governor in its battle against the New York banking regulator's allegations that it hid $250 billion of transactions with Iran.
That allegation followed the Libor interest rate rigging scandal, which has embroiled Barclays and Royal Bank of Scotland among others, and after global peer HSBC apologised over a drug money laundering report by the US Senate. Trading volumes in StanChart, which went ex-dividend on Wednesday, limiting some of its gains, stood at more than 6 times its 90-day daily average, compared with the FTSEurofirst index at around 75 percent. With little fresh news from Europe, investors took the opportunity to bank gains in sectors that have rallied recently, including auto-related stocks and the energy sector, which has gained 6.7 percent over the last month.
Vedanta, which bought a stake in oil explorer Cairn's India operation less than eight months ago, was down 2.1 percent after the chief executive of Cairn India, Rahul Dhir, unexpectedly resigned. Cairn shed 4.2 percent. Traders also cited profit taking with both stocks up more than 10 percent in the past month. Ex-dividend factors also weighed as 15 UK bluechip stocks traded without entitlement to the latest dividend payout, including heavyweights Royal Dutch Shell, BP, AstraZeneca, and GlaxoSmithKline.