European shares touched three-month highs on Thursday, helped by food and facilities group Sodexo rallying after a solid update and a share buyback announcement. The market was also buoyed by indications from the US Federal Reserve late on Wednesday that the US economy was strong enough to cope with an interest rate hike. Expectations of more monetary support from the European Central Bank (ECB) next month added to that.
"Sentiment is positive thanks to signs of solid economic growth, with the US economy nearing full employment," said Alessandro Allegri, Ambrosetti Asset Management CEO. "In Europe and Japan, central banks are carrying on with easy monetary policy to support growth and this plays in favour of stock markets." The pan-European FTSEurofirst 300 index initially rose 1 percent to its highest level since late August, before edging back to stand 0.5 percent higher. The euro zone's bluechip Euro STOXX 50 index also rose 0.5 percent.
Sodexo jumped 10.7 percent, its biggest one-day gain since March 2003, after saying it would cut costs further to cope with a volatile global economy. It also forecast higher revenues and operating profit for its 2015-16 fiscal year. Analysts said the results were stronger than expected, while a 300-million-euro share buyback also pleased investors. Mining company stocks also gained ground, with BHP Billiton leading its peers after saying its priority was to maintain a healthy balance sheet.
The mining sector was further helped as the US dollar backed off highs. A cheaper dollar makes dollar-priced metals more affordable for non-US investors. Thyssenkrupp rose 1.8 percent, reversing initial losses after mixed results and a cautious outlook for the year. Brokers said that while the dividend was less than expected, quarterly adjusted operating profits had beaten expectations. The impact of last week's attacks in Paris looked to be easing as travel and leisure stocks rose 1.6 percent after falling on Wednesday.
However, Greek stocks fell, with shares in the country's leading banks slumping as they unveiled discount share offerings aimed at raising funds to plug a capital shortfall. Ambrosetti's Allegri expected across-the-board gains for European shares in coming weeks but said some profit-taking could kick in towards the end of the year. He said undervalued energy stocks might be worth buying although risks remained, due to low oil prices.