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Paris - European shares gained ground in early trade on Thursday, extending the previous session's rebound as a further drop in the euro fuelled expectations of a boost to the region's corporate earnings.
The single currency sank to $1.2715 on Thursday morning, its lowest level in nearly two years, reflecting a widening divergence between the monetary policies outlooks of the US Federal Reserve and the European Central Bank.
After proving a major headwind for exporters in the first part of the year, the sharp slide in the euro - down 9% against the dollar since early May - is seen bringing much-needed breathing space for European companies.
The drop should give a boost of 3% to 6% to corporate earnings, according to analysts and fund managers, with in particular industrial and pharmaceutical groups such as Siemens and Sanofi, which derive the bulk of their revenues from outside the eurozone, set to benefit.
"If the euro doesn't bounce back, this bodes really well for European earnings in the coming quarters," Talence Gestion fund manager Alexandre Le Drogoff said.
"And the positive impact goes beyond the mechanical effect from the currency conversion of sales from abroad. The lower euro should fuel inflation in the euro zone and lowers the risk of deflation, which is really good news for the region."
At 07:54, the FTSEurofirst 300 index of top European shares was up 0.3% at 1 389.63 points, having gained 0.8% on Wednesday after European Central Bank president Mario Draghi renewed its pledge to keep monetary policy loose for a long time.
In an interview published on Thursday in Lithuanian business daily Verslo Zinios, Draghi repeated that the ECB stands ready to do more to support the economic recovery should it become necessary, sending the euro currency lower.
Around Europe, UK's FTSE 100 index was up 0.1%, Germany's DAX index up 0.3%, and France's CAC 40 up 0.2%.
Shares in Airbus rose 2%after the European plane maker raised its 20-year forecast for jet demand. The group, which cited growth in emerging markets, with China on the brink of becoming the world's aviation powerhouse, said it saw strong demand for wide-body long-distance jets as airport constraints force airlines to upgrade from smaller planes on some routes.
Shares in the world's second-biggest fashion retailer H&M sank 4% after it reported in-line quarterly profits but said sales had slowed in September.
Heavyweight miners resumed their pull-back, with Rio Tinto down 1.1% and BHP Billiton down 1.7%. They fell along with China's rebar steel futures which sagged to a record low on Thursday amid weak demand that an industry official said was driven by a slowdown and restructuring of the economy.
That added pressure on spot prices of steelmaking raw material iron ore, which have lost around 40% this year, falling below $80 a tonne this week to their lowest since 2009.
Spanish stocks slightly outperformed, with Madrid's IBEX up 0.4%. A source told Reuters that China and Spain were set to sign business deals worth about €3bn in Beijing this week, as Prime Minister Mariano Rajoy visits to drum up support for his country's economy.
