European shares rose nearly one percent on Monday to five month highs, inspired by a rally on Wall Street while technology stocks put up a strong performance. Dutch retailer Ahold rose 3.2 percent to 5.49 euros after it agreed to sell its Spanish assets to venture capital group Permira for 685 million euros. German chemicals giant BASF rose 0.82 percent to 49.16 euros on news it will double its share buyback programme to one billion euros, opting to return cash to shareholders in the absence of a big acquisition. By 0910 GMT, the FTSEurofirst 300 index <.FTEU3> of pan-European blue chips was 0.96 percent stronger at 1,014.2 points, having hit a high of 1,015.8 points -- a level not seen since April 28. The index had risen nearly two percent on Friday. Shares in oil major BP lagged the market rally and were up just 0.46 percent after saying it expected overall third-quarter production to be up 11 percent on the year. "The numbers are a little disappointing. We are seeing strong growth but down from previous highs," said Kevin Baker, equity market strategist at Commerzbank. The narrower DJ Euro Stoxx 50 index <.STOXX50E> rose 1.1 percent to 2,827.0 points. "Earnings growth and economic momentum are slowing, but we are seeing that markets are reassessing the degree of the slowdown," said Baker.
"Markets have been bracing for bad news as we head into the third quarter earnings season. But we think there has been excessive pessimism." The main quarterly earnings reporting period in Europe does not start till next week, while aluminium producer Alcoa and industrial conglomerate General Electric kick off the U.S. reporting season this week. High-profile profit warnings from consumer goods giant Unilver and home appliance maker Electrolux had hit market sentiment late last month. European shares made strong gains on Friday helped by encouraging U.S. economic data and a new dip in oil prices. U.S. stocks rallied after software stocks boosted the Nasdaq to its highest close in about three months. In New York on Friday, the Dow Jones industrial average ended 1.1 percent higher at 10,192.65 points, and the tech-laced Nasdaq Composite jumped 2.4 percent to 1,942.2 points. On Monday, U.S. stock futures indicated a strong start for Wall Street.
TECHS RALLY
Chip makers put on strong gains, tracking a rise in the sector's shares on Wall Street. Germany's Infineon rose 3.2 percent while Franco-Italian STMicroelectronics gained 2.5 percent and Dutch chip maker ASML jumped 3.7 percent. The DJ Stoxx tech sector <.SX8P> rose 1.42 percent. Semiconductor-related stocks helped the Nasdaq rally on Friday after JP Morgan raised investment ratings on U.S. chip equipment makers. Around Europe, London's FTSE 100 <.FTSE> rose 0.7 percent to a 27-month high, Zurich's SMI <.SSMI> gained 0.98 percent while Frankfurt's DAX <.GDAXI> rallied 1.4 percent. Paris's CAC-40 <.FCHI> put on 1.1 percent. "We see sectors such as telecom and insurance as strong performers," said Commerzbank's Baker, adding that these had "attractive" valuations. Deutsche Telekom and Telecom Italia are among Commerzbank's top picks in the sector. Technology and media stocks also seemed good plays, he said. Autos <.SXAP> put on 1.5 percent, helped by BMW's late Friday news of a 31 percent rise in U.S. vehicle sales. Shares in BMW rose 1.94 percent to 34.7 euros. Oil prices slipped on Monday to $49.50 a barrel, down 62 cents after a threat to Nigerian crude flows receded. Strategists said optimism over the U.S. economy's growth was helping boost investor sentiment. "Evidence that US soft patch may be behind us even if only temporarily has already triggered an adjustment in the bond yields," said Anais Faraj, strategist at Nomura. "And, if last week's market performance is anything to go by, the next few weeks could see some decent upside for global equities."///