Earnings help European shares rebound as ECB holds steady

Reuters - UK Focus

* FTSEurofirst 300 up 1.4 pct, rallying with Wall St

* Index had faltered after Draghi offers little new

* Alcatel (Paris: FR0000130007 - news) -Lucent surges 8.5 percent after results

* Indexes rebound after hitting "oversold" levels

By Alistair Smout

LONDON, Feb 6 (Reuters) - European equities bounced back onThursday after a two-week drop, with reassuring earnings reportsboosting shares despite the European Central Bank dashing hopesof some immediate extra monetary easing.

Heading into the close the pan-European FTSEurofirst 300 was up at intraday highs, rallying with Wall Streetdespite a temporary setback after the ECB left interest rates onhold.

The index pared its gains during a press conference in whichECB President Mario Draghi revealed no specific measures to easepolicy further, holding off on any action pending new economicforecasts next month.

However, the pullback was short-lived, with traders findingreasons to be hopeful that the central bank may introduceadditional measures in March.

"Not many economists were predicting a change in policy, soit shouldn't come as much surprise, but in the run up to themeeting there had been a pick-up in speculation that he might dosomething," Alastair McCaig, analyst at IG (LSE: IGG.L - news) , said.

"Disappointing that nothing was really said, but withinflation so low, it does feel that he has no more leeway, sounless that improves then actions will have to be taken nextmonth."

Buying was supported by data from the fourth-quarterearnings season, which has gathered pace in Europe.

Alcatel-Lucent surged 8.5 percent in heavy volumesafter the telecom gear maker posted forecast-beating grossmargins and operating profit, prompting hedge fund short sellersto unwind negative bets on the stock.

According to data from Markit, about 9 percent of Alcatel'sshares are out on loan, up from 6.3 percent in mid-December,making it the most shorted stock on France's CAC 40.Short selling involves selling borrowed shares in theexpectation of being able to buy them back more cheaply later.

AkzoNobel rose 7.6 percent, the second-biggestgainer on the FTSEurofirst 300 as the Dutch paints andchemicals firm reported higher-than-expected earnings and hopedto meet its 2015 targets.

Trading volumes of Alcatel-Lucent and AkzoNobel were 280 percent and 360 percent of their 90-day daily average, against93 percent for the FTSEurofirst 300.

Charts show the euro zone's blue-chip Euro STOXX 50 index rebounded after its nine-day relative strength index(RSI) slipped to 26 in the previous session. A level below 30 isconsidered "oversold" and often attracts buyers.

The index was up 1.5 percent at 2,008.16 points by 1527 GMT,while the pan-European FTSEurofirst 300 index rose 1.4 percentto 1,289.16 points after its RSI fell to 27 on Wednesday.

"It's very likely to see a short-term stabilisation in themarket as we have seen an 'oversold' situation and the EuroSTOXX 50 index is nearing some important support zones,"Thorsten Grisse, technical strategist at Commerzbank (Xetra: CBK100 - news) , said.

"It does not mean that the recent consolidation process isover, but from a medium-term perspective, we are still in a finebull market."

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