European shares snap five-day losing streak as tech, Italy banks rebound

By Danilo Masoni and Helen Reid

MILAN/LONDON (Reuters) - European shares rose on Wednesday in a broad-based bounce that saw the battered tech sector recover following a sharp sell-off on worries over iPhone demand and pricey valuations, and Italian banks rise from two-year lows.

The STOXX 600 <.STOXX> climbed 1.1 percent, snapping a five-day losing streak that had pushed the pan-European benchmark close to the near two-year low hit last month.

Germany's DAX <.GDAXI> index jumped 1.6 percent, its strongest day since July 26.

Indices managed to hold on to opening gains, something they haven't succeeded to do for several days as a global bear market saps investors' appetite for stocks.

Italian banks <.FTIT8300> rose as much as 2.6 percent after a report said Deputy Prime Minister Matteo Salvini might be open to reviewing the government's 2019 budget, fuelling hopes the country could avert a clash with the European Commission.

The index held on to early gains despite Salvini then saying he was not open to negotiations over Italy's budget deficit of 2.4 percent of GDP.

Banks ended the day 2.4 percent higher, having hit a near two-year low on Tuesday.

The European Commission took a first step towards disciplining Italy over its expansionary 2019 budget after Rome refused to change it, raising the stakes in a dispute that has alarmed the whole euro zone and could eventually lead to fines.

Italian banks have lost around 40 billion euros in market cap from their May peak as worries over Italy's spending plans lifted government bonds yields to multi-year highs, eroding the value of their large sovereign bond portfolios and raising the risk of possible capital injections for the weaker lenders.

Top gainer among Italian banks was Milan-based Banco BMP <BAMI.MI>, which rallied 7.6 percent, while heavyweight lenders Intesa Sanpaolo <ISP.MI> and UniCredit <CRDI.MI> rose 2.8 and 1.8 percent respectively.

The broader European banking index <.SX7P> was among the biggest sectoral gainers, up 1.8 percent, while tech stocks <.SX8P> jumped 2.2 percent, bouncing back from their lowest level since the end of February.

Stocks supplying chips to Apple rebounded sharply. STMicroelectronics <STM.MI> and Infineon <IFXGn.DE> climbed 4.2 to 4.3 percent while Austrian chipmaker AMS <AMS.S> rose 9.1 percent.

While the rebound was broad-based with no sector in the red, investors remained cautious over the outlook for the market due to lingering concerns over slowing economic and earnings growth.

Analysts were still cutting their estimates for European earnings as an underwhelming third-quarter results season drew to a close.

Company updates triggered sharp share price moves.

Shares in Swedish medical equipment firm Getinge <GETIb.ST> rose 10.8 percent as traders said the company's capital markets day alleviated some of analysts' and investors' concerns. The shares are down 26 percent year-to-date amid profit warnings.

Indivior <INDV.L> sank 11 percent after it warned it could take a hit if the rival drug from Dr. Reddy's Laboratories <REDY.NS> comes to market this year.

Johnson Matthey <JMAT.L> led gainers on the STOXX, up 13.7 percent, after the speciality chemicals company, which makes materials used in electric car batteries, raised its full-year guidance.

In eastern European markets, Polish stocks had their best day since January, up 2.7 percent, after the government changed tack on legal reforms that have fuelled a crisis in relations with the European Commission.

For a graphic on STOXX 600 earnings revisions Nov 21, see - https://tmsnrt.rs/2PIKT0M

(Reporting by Danilo Masoni, Editing by Andrew Heavens, William Maclean)