Wed Sep 12, 2012 12:48pm EDT
* FTSEurofirst 300 ends up 0.1 pct at 1,108.02 points
* Euro STOXX 50 rises 0.3 pct to 2,564.80 points
* BAE surges 10.6 pct on planned EADS deal
* German court ruling on euro zone rescue deal pushes markets higher
* Some traders cautious over weak economy, Fed uncertainty
By Sudip Kar-Gupta
LONDON, Sept 12 (Reuters) - European shares hit fresh highs on Wednesday as a ruling from a top German court paved the way for policymakers to take further steps to tackle the euro zone's debt crisis, although lingering worries over the economy pushed markets off intraday peaks.
Some traders took profits on equities late in the session before a U.S. Federal Reserve meeting this week, reflecting uncertainty as to whether the Fed will launch new stimulus measures to help the struggling U.S. economy.
The FTSEurofirst 300 index closed up 0.1 percent at 1,108.02 points, having at one stage reached an intraday high of 1,115.90 points - its highest level since early July 2011.
The euro zone's Euro STOXX 50 index closed up 0.3 percent at 2,564.80 points - not too far off a 2012 peak of 2,611.42 points reached on March 16.
Germany's top court gave a green light for the country to ratify the euro zone's new bailout fund and budget pact, but insisted the German parliament have veto powers over any future increases in the fund's size.
Nevertheless, many traders said the decision was another key step to fixing Europe's economic problems and closed out "short" positions that had been betting on future falls on markets such as France's CAC-40 and the Euro STOXX 50.
"We closed out some small short positions on the CAC and the Euro STOXX. It's another building block for a better situation in Europe," said Clairinvest fund manager Ion-Marc Valahu.
While the euro zone crisis is still far from resolved, investors have said that the European Central Bank's pledges for a new government bond-buying programme have at least reduced the risk of a major economic implosion in the region.
Trading volumes on key markets also came in above their average levels, adding to a further sense of conviction behind the equity rally.
Trading volumes were at roughly 180 percent of their 90-day average on Germany's DAX, and at 133 percent of that average on the CAC.
BAE SURGES ON PLANNED EADS DEAL
British aerospace and defence group BAE Systems topped the FTSEurofirst 300 leaderboard, surging by 10.6 percent after it said it was in talks with European peer EADS over a possible tie-up. EADS fell 5.6 percent.
Banks also performed well, with the STOXX European banking index rising by 1.3 percent to make it the best-performing European equity sector.
"We have reduced our 'underweight' on financials because some of the tail risk has been removed from the table, at least for now," said SWIP Investment Director Greig Bryson.
Mike Turner, European equity options broker at XBZ Ltd, added that clients had been buying 'call' options - which are used when investors expect an asset price to rise - on the Euro STOXX 50, with a strike price of 2,800 points maturing on October 28 - indicating they expected the index could rise some 9 percent over the coming month.
However, others were more cautious due to worries that fresh stimulus measures from the ECB or the Fed might not necessarily be enough in the face of a global economic slowdown.
Michel Juvet, chief investment officer at Swiss bank Bordier, said he had sold some of his equity holdings last week ahead of the German court ruling and Fed meeting.
"Markets can only really go higher if we have a revival of economic growth worldwide, but in the U.S we might have a bad year end and confusion on the fiscal policy could provoke a mini stagnation. In Europe, there is no reason to see growth coming back soon, so earnings growth will be revised down," he said.
* FTSEurofirst 300 ends up 0.1 pct at 1,108.02 points
* Euro STOXX 50 rises 0.3 pct to 2,564.80 points
* BAE surges 10.6 pct on planned EADS deal
* German court ruling on euro zone rescue deal pushes markets higher
* Some traders cautious over weak economy, Fed uncertainty
By Sudip Kar-Gupta
LONDON, Sept 12 (Reuters) - European shares hit fresh highs on Wednesday as a ruling from a top German court paved the way for policymakers to take further steps to tackle the euro zone's debt crisis, although lingering worries over the economy pushed markets off intraday peaks.
Some traders took profits on equities late in the session before a U.S. Federal Reserve meeting this week, reflecting uncertainty as to whether the Fed will launch new stimulus measures to help the struggling U.S. economy.
The FTSEurofirst 300 index closed up 0.1 percent at 1,108.02 points, having at one stage reached an intraday high of 1,115.90 points - its highest level since early July 2011.
The euro zone's Euro STOXX 50 index closed up 0.3 percent at 2,564.80 points - not too far off a 2012 peak of 2,611.42 points reached on March 16.
Germany's top court gave a green light for the country to ratify the euro zone's new bailout fund and budget pact, but insisted the German parliament have veto powers over any future increases in the fund's size.
Nevertheless, many traders said the decision was another key step to fixing Europe's economic problems and closed out "short" positions that had been betting on future falls on markets such as France's CAC-40 and the Euro STOXX 50.
"We closed out some small short positions on the CAC and the Euro STOXX. It's another building block for a better situation in Europe," said Clairinvest fund manager Ion-Marc Valahu.
While the euro zone crisis is still far from resolved, investors have said that the European Central Bank's pledges for a new government bond-buying programme have at least reduced the risk of a major economic implosion in the region.
Trading volumes on key markets also came in above their average levels, adding to a further sense of conviction behind the equity rally.
Trading volumes were at roughly 180 percent of their 90-day average on Germany's DAX, and at 133 percent of that average on the CAC.
BAE SURGES ON PLANNED EADS DEAL
British aerospace and defence group BAE Systems topped the FTSEurofirst 300 leaderboard, surging by 10.6 percent after it said it was in talks with European peer EADS over a possible tie-up. EADS fell 5.6 percent.
Banks also performed well, with the STOXX European banking index rising by 1.3 percent to make it the best-performing European equity sector.
"We have reduced our 'underweight' on financials because some of the tail risk has been removed from the table, at least for now," said SWIP Investment Director Greig Bryson.
Mike Turner, European equity options broker at XBZ Ltd, added that clients had been buying 'call' options - which are used when investors expect an asset price to rise - on the Euro STOXX 50, with a strike price of 2,800 points maturing on October 28 - indicating they expected the index could rise some 9 percent over the coming month.
However, others were more cautious due to worries that fresh stimulus measures from the ECB or the Fed might not necessarily be enough in the face of a global economic slowdown.
Michel Juvet, chief investment officer at Swiss bank Bordier, said he had sold some of his equity holdings last week ahead of the German court ruling and Fed meeting.
"Markets can only really go higher if we have a revival of economic growth worldwide, but in the U.S we might have a bad year end and confusion on the fiscal policy could provoke a mini stagnation. In Europe, there is no reason to see growth coming back soon, so earnings growth will be revised down," he said.
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