Earnings help European stocks bounce back as ECB holds steady

* The FTSEurofirst 300 index closes with 1.4 percent. higher and Wall Street gains

* The index fell after Draghi did not provide much new information

* Alcatel (Paris: FR0000130007 – news) – Lucent rises 9.2 percent after results

* Indices rebound after reaching oversold levels

By Alistair Smout

LONDON, Feb 6 (Reuters) – European stocks improved sharply on Thursday after a two-week decline, with reassuring earnings reports lifting shares even as the European Central Bank dashed hopes of immediate additional monetary easing.

The pan-European FTSEurofirst 300 index closed near intraday highs, rebounding with Wall Street despite a temporary setback after the ECB left interest rates unchanged.

The index pared its gains after a news conference in which ECB President Mario Draghi did not reveal any specific measures to further ease policy, holding off on taking any action until the publication of new economic forecasts next month.

The slowdown was short-lived, however, and investors found reason to hope that the central bank could introduce additional measures in March.

“Few economists predicted a change in policy, so it shouldn’t be a big surprise, but in the run-up to the meeting there was increasing speculation that he might do something,” said Alastair McCaig, an analyst at IG (LSE: IGG.L – news).

“It is disappointing that nothing has been said, but with inflation so low it seems there is no more room for manoeuvre for him, so if things do not improve then action will have to be taken next month.”

Buying was supported by data from the fourth-quarter earnings season, which gained momentum in Europe.

Alcatel-Lucent posted a strong 9.2 percent increase in volumes after the telecommunications equipment maker reported exceeding forecasts in gross margins and operating profit, prompting hedge funds to unwind negative bets on the stock.

About 9 percent of Alcatel shares are borrowed, according to Markit data, down from 6.3 percent in mid-December, making the company the most short-lived on France’s CAC 40 index.

Short selling involves selling borrowed shares with the assumption that they can be bought back at a lower price later.

AkzoNobel gained 6.5 percent, the second-biggest position on the FTSEurofirst 300, after the Dutch paints and chemicals company reported better-than-expected profits and hoped to hit its 2015 targets.

The trading volume in shares of Alcatel-Lucent and AkzoNobel was 324%, respectively. and 422 percent their 90-day daily average, while in the case of the FTSEurofirst 300 index this indicator was 140%.

Charts show the Euro STOXX 50 index of euro zone blue-chip companies has rebounded after its nine-day relative strength index (RSI) fell to 26 in the previous session. A level below 30 is considered “sold out” and often attracts buyers.

The index increased by 1.6%. to 3,010.79 points at closing, while the pan-European FTSEurofirst 300 index increased by 1.5%. to 1,290.41 points after its RSI fell to 27 on Wednesday.

“It is very likely that the market will see a short-term stabilization as we have observed an oversold situation and the Euro STOXX 50 index is approaching important support zones,” Thorsten Grisse, technical strategist at Commerzbank (Xetra: CBK100 – news ), said.

“This does not mean that the recent consolidation process is over, but in the medium term we are still in a good bull market.”

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