July 1, 2014 / 12:11 PM / 4 years ago

BNP Paribas leads European shares higher after sanctions settlement

* FTSEurofirst 300 up 0.5 pct

* BNP Paribas rises on relief at U.S. sanctions settlement

* Chinese data lift mining sector

By Tricia Wright

LONDON, July 1 (Reuters) - European shares advanced on Tuesday, led by BNP Paribas on relief that it settled a U.S. sanctions case, while mining stocks rallied on robust data out of top metals consumer China.

The pan-European FTSEurofirst 300 index was up 0.5 percent at 1,377.07 points by 1037 GMT.

BNP Paribas was a top gainer, rising 3.8 percent in robust trading volume of almost twice its 90-day daily average, having lost some 20 percent - or $21 billion of its market value - since Feb. 13 when it announced the provision for the fine.

The French bank pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve allegations that in many financial dealings it violated U.S. sanctions against Sudan, Cuba and Iran.

Analysts and investors said the stock could now recover ground lost over the last few months.

“The size of the fine we knew, the reaction is more to do with BNP’s extremely reassuring comments and the efforts made to protect the dividend. The bank is keeping its 2015 targets so this must mean they enjoyed a very good first half of the year,” Montsegur Finance fund manager Francois Chaulet said.

Mining stocks were also in demand as upbeat factory sector activity data out of China reinforced signs of stabilisation in the economy.

Rio Tinto was among best performers, up 2.6 percent, having fallen some 6.5 percent this year - underperforming a 4 percent rise for the mining sector as a whole.

An upgrade to “buy” from BofA Merrill Lynch, citing factors including valuation grounds, also lent support. Rio is on a 12-month forward price/earnings ratio of 9.6 times, against a long-running average of 12.3 times.

“Valuation is now compelling and we think that iron ore, a key driver for RIO, is bottoming. Concerns on Chinese real estate persist but our house view is that these are manageable and that the government will be successful in walking the fine line between over-stimulating and an abrupt slow down,” BofA ML analysts said in a note.


Portugal’s Banco Espirito Santo recovered some of its poise after steep falls earlier in the session, finding support from a short-selling ban on the stock.

Portugal’s CMVM market regulator announced late on Monday it would ban naked short-selling of shares - where an investor is under no obligation to cover its exposure - in BES and Espirito Santo Financial Group (ESFG).

The shares advanced 4.3 percent after dropping to an 11-month low on Monday when it failed to allay concerns about the company’s dealings with its founding family and its troubled Angolan operations.

Commenting on the broader market trend, McLaren Securities’ managing director Terry Torrison said he expected European stock markets to trade sideways in the traditionally quiet summer months of July and August before rising more sharply towards the end of 2014.

Other analysts also said the market’s longer-term outlook remained positive.

Even though data on Tuesday showed that manufacturing growth had eased within the euro zone currency bloc, analysts said new economic stimulus measures from the European Central Bank would support the region’s stock markets.

“I think people will still buy the market on the dip,” Central Markets Investment Management head of trading Darren Courtney-Cook said.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today’s European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by Louise Ireland)

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