Construction outlook brightens European equity markets

European equity markets were supported yesterday by an overnight surge on commodity markets and hopes that global stimulus packages would drive infrastructure and construction spending.

Recovery in the construction and building materials sector was high on the agenda after Switzerland's Holcim , the world's second-largest cement maker, said it expected stimulus measures across Europe and the US to drive growth in the coming quarters.

This brighter outlook combined with the company's announcement of better-than-expected second quarter profit and success in cutting costs, pushed shares 6.1 per cent higher to SFr69.45. It also had a big impact on the sector. Germany's HeidelbergCement rose 2.3 per cent to 34.98 euros, while Irish building materials group CRH climbed 3.3 per cent to 18.49 euros.

This was in contrast to the mood in the sector on Wednesday after Nomura downgraded its outlook. The broker said there was an "absence of macro data suggesting a sustained recovery in end markets".

Austrian brick maker Wienerberger , which reported forecast-beating results on Tuesday, climbed 0.5 per cent to 13.93 euros after price target upgrades from both Deutsche Bank and Citigroup.

Hochtief , the German builder, rose 6.1 per cent to 52 euros after Deutsche Bank upgraded the stock to "buy" from "hold" and lifted its target price to 67 euros from 41 euros.

Deutsche Bank analyst Michael Kuhn said: "Hochtief provides an attractive investment case - from the second quarter, it should benefit significantly from construction orders from worldwide stimulus packages."

With strong support also from resource-related stocks, the FTSE Eurofirst 300 ended the session 1.4 per cent higher at 944.94.

UBS was up 4.5 per cent at SFr17.50 after the Swiss government sold its stake in the bank for SFr16.50 per share, making a profit of SFr1.2bn.

(From Financial Times)