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* Pan-European STOXX 600 index rises 0.8 pct
* UK mid-cap index hits record high as sterling slumps
* Deutsche Bank bounces back to touch 2-week high
* Randgold, Fresnillo drop on weaker gold prices
By Atul Prakash
LONDON, Oct 4 European shares advanced on
Tuesday, with Germany's Deutsche Bank hitting a two-week high
following steep losses and the world's biggest education company
Pearson gaining after encouraging comments by Morgan
Pearson rose 5.2 percent, among the top gainers in the
pan-European STOXX 600 index, after Morgan Stanley said
the company was unlikely to issue a profit warning, "meaning the
shares could recover sharply on the Q3 results".
Deutsche Bank rose as much as 3.5 percent to a two-week
high. Its shares had slumped to a record low on Friday before
bouncing back on expectations of a swift deal with U.S.
authorities over a multi-billion dollar penalty.
HSBC said that despite Deutsche Bank's obvious operational
shortcomings, fears over the bank's solvency were overdone.
However, HSBC cut its target price for the bank, forecasting
challenging conditions for the banking environment.
"Deutsche Bank should be well equipped to deal with this
short-term lack of confidence," HSBC analysts said. "We maintain
our 'hold' rating despite the selling pressure on the market as
we believe the fundamentals of the company have not changed."
Its shares ended up 1.5 percent.
The STOXX Europe 600 index rose 0.8 percent, while
Germany's DAX, which resumed trading after a holiday on
Monday, added 1 percent.
Britain's domestically-focused mid-cap FTSE 250 rose
0.8 percent to a record high, while the FTSE 100 index,
dominated by international firms, gained 1.3 percent to 7,074
points - the first time since the mid-2015 it breached the 7,000
mark - as the pound slid to its lowest in more than three
decades on fears of a "hard Brexit" from the European Union and
its single market that could hurt the economy.
Among sector movers, BMW rose 3.3 percent and
helped the European auto and parts index to gain 2
percent after Exane BNP Paribas raised its target price for the
automaker to 87 euros from 70 euros.
Shares in Intertek rose 5.2 percent after Jefferies
raised its stance on the stock to "buy" from "underperform" and
lifted its target price to 4,300 pence from 3,000 pence.
Precious metal stocks Randgold and Fresnillo
both fell more than 5 percent, leading losers on the
STOXX index, as gold prices fell to their lowest since Britain's
Brexit vote in June, as a bounce in the dollar after upbeat U.S.
data triggered a break of key support at $1,300 an ounce.
(Additional reporting by Danilo Masoni in Milan; Editing by