European stocks bounce back

European stocks staged a rebound on Thursday as investors shrugged off another subprime shock from the US, while engineering groups welcomed strong quarterly numbers from Alstom.

US markets opened higher, as bargain hunting in the beaten-down technology sector helped offset the effect of weakness from US bank Merrill Lynch. Merrill announced that it took $11.5bn in writedowns on credit and subprime exposure and reported a much worse than expected quarterly loss.

By mid afternoon in London, the FTSE Eurofirst 300 was up 0.8 per cent to 1,393.72, Frankfurt's Xetra Dax added 0.4 per cent to 7,501.22, the CAC 40 in Paris gained 0.4 per cent to 5,248.12 and London's FTSE 100 climbed 0.8 per cent to 5,991.5.

French engineering group Alstom rose 5.3 per cent to EU135.37 after reporting better-than-expected third-quarter sales, up 20 per cent, and confirming its forecasts for its full financial year.

The company, which builds power stations and railways, said the third quarter included new orders of EU4.7bn for its Power Systems division.

The sector welcomed the results and Sweden's Atlas Copco climbed 4.6 per cent to SKr80.50, and Spanish wind turbine manufacturer Gamesa rallied 6.6 per cent to EU26.91.

Retailers received some welcome cheer after Dutch supermarkets group Super De Boer said consumer spending was strong over Christmas and that it had seen no signs of a consumer slowdown. The company reported a 4 per cent rise in like-for-like sales in its fourth quarter.

Super De Boer rose 7.4 per cent to EU2.90, while larger domestic rival Ahold climbed 4.7 per cent to EU8.17.

Belgian supermarket operator Delhaize, which makes most of its revenues in the US, climbed 3.2 per cent to EU51.01 after its drop in fourth-quarter sales was no worse than expected. Like-for-like, the group reported 3.7 per cent sales growth in the US, and 1.3 per cent in Belgium.

Technology stocks bounced after Wednesday's losses, with Infineon (NYSE:IFX), the German chipmaker, recovering after US rival Intel reported quarterly profits that lagged expectations. Infineon climbed 7.6 per cent to EU6.93, Franco-Italian rival STMicroelectronics (NYSE:STM) rose 4.5 per cent to EU8.56 and Dutch chip manufacturing equipment maker ASML (NASDAQ:ASML) gained 4.7 per cent to EU18.15.

Alcatel (NYSE:ALA)-Lucent, the telecoms equipment maker, rose 4.7 per cent to EU4.74 after it said it had won a Brazilian network services contract.

Novartis, the Swiss drugmaker, missed market forecasts with its fourth-quarter profit due to higher research and development costs and restructuring charges. Even though the company announced a SFr10bn share buyback, the shares fell 3.1 per cent to SFr59.35.

"The numbers were complicated by one-off charges, but still missed on an underlying basis and uncertainty remains about recovery," said Alexandra Hauber at Bear Stearns.

Makers of alcoholic beverages fell after France's Remy Cointreau reported weaker-than-expected sales growth in the pre-Christmas period.

Remy shares were down 11.2 per cent to EU38.67, while domestic rival Pernod Ricard lost 5.5 per cent to EU67.03, and Britain's Diageo shed 2.6 per cent to 992p.