* Pan-European STOXX 600 index up 0.6 percent
* PMI surveys underpin broader stock markets
* DAX surges back to May 2015 levels
* HSBC slumps after plunge in pre-tax profits
(Adds details, closing prices)
By Atul Prakash and Danilo Masoni
LONDON/MILAN, Feb 21 European shares rose to
their highest in over 14 months on Tuesday, with optimism
generated by encouraging manufacturing surveys outpacing a steep
decline in HSBC shares after a slump in the heavyweight
bank's annual pre-tax profit.
Europe's biggest bank dropped 6.5 percent and scored its
biggest one-day fall in eight years after its results fell far
short of analysts' estimates as it took hefty writedowns from
HSBC has been among the best-performing European banks since
Britain voted last June to leave the European Union, climbing
more than 50 percent against a 28 percent increase in the
European banking index as the bank benefited from
appreciation of the U.S. dollar and stronger capital levels.
"The bank is a shining example of how the decline in
sterling has bumped up the price of some of the UK's largest
companies, without much progress in underlying profits," said
Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Despite an underwhelming set of full year results, HSBC is
making progress in de-risking and restructuring, and ultimately
the bank's focus on the Far East could be its trump card if the
Chinese economy starts to fire on all cylinders."
HSBC was the biggest decliner in the European banking index,
which fell 0.9 percent and capped broader stock market gains.
The pan-European STOXX 600 index rose 0.6 percent after
falling earlier in the session.
Britain's FTSE 100 index, dominated by several
global banks, underperformed. It fell 0.3 percent following an
over 3 percent plunge in the UK banking index.
However, Germany's benchmark DAX index rose 1.2
percent to its highest level since May 2015, underpinned by a
survey showing growth in the country's private sector picked up
in February to reach its highest in nearly three years, driven
by humming factories.
Euro zone private sector and manufacturing growth also
unexpectedly accelerated to near a six-year high in February and
job creation reached its fastest since August 2007, propelled by
strong demand and optimism about the future.
But investors stayed concerned about the political risk.
They have been rattled by the prospect of anti-euro, far-right
leader Marine Le Pen staging another political surprise in the
race for the French presidency, with a poll on Monday showing
her closing the gap with centrist opponents.
Shares moves on Tuesday remained mixed.
Mid-cap firm John Wood dropped 7.9 percent, the
biggest faller in the STOXX 600, after saying that oil and gas
markets continued to present challenges and that it remained
cautious on the near term outlook.
French oil storage and distribution company Rubis
was up 4.6 percent after the company said a would buy Dinesa and
its subsidiary Sodigaz, a fuel products distributor in Haiti.
Shares in Italian asset manager Mediolaum fell 6.7
percent, their worst day in eight months, with a trader citing
warnings from CEO Massimo Doris that a new way to calculate
performance fees could put earnings and dividend at risk next
(Reporting by Atul Prakash; Editing by Alison Williams)