Europe shares up for 4th day at 26-month close high

By Brian Gorman

LONDON (BestGrowthStock) – European shares rose for a fourth straight day to hit a 26-month closing high on Thursday, as a fall in U.S. jobless claims, as well as extended tax cuts, sparked optimism on growth in the world’s biggest economy.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares rose 0.4 percent to 1,123.75 points, the highest close since late September 2008.

The European benchmark is up more than 74 percent from its lifetime low of March, 2009, with several major economies having emerged from recession, helped by stimulus from governments and central banks worldwide.

“People are focusing on the growth prospects for next year,” said Richard Jeffrey, chief investment officer at Cazenove Capital Management, said.

“The levels (of equities) might well prove sustainable, but what we would expect to see is people focusing more on value and defensiveness, rather than cyclicality and risk.”

Heavyweight financial stocks were among those boosting the index. Barclays (BARC.L: ), UBS (UBSN.VX: ), Societe Generale (SOGN.PA: ) and AXA (AXAF.PA: ) rose between 2.5 and 4.6 percent.

Analysts said stocks like AXA, a poor performer this year, were catching up with the recent rally in the market and were benefitting from sector rotation.

Standard Chartered (STAN.L: ) bucked the trend, down 3.6 percent after it said costs were rising quickly as it fights to hire and retain staff in its hot Asian markets, taking the gloss off record income and profits.

Jeffrey said he expected sectors like telecoms and drugs to be among the better performers going forward.

On the downside, automobile stocks (.SXAP: ) fell 2.1 percent, with traders citing a report China may end tax breaks for passenger cars. Auto-parts maker Continental (CONG.DE: ) dropped 6.5 percent, while Peugeot (PEUP.PA: ) and BMW (BMWG.DE: ) 5.5 and 2.8 percent respectively.

NEW CLAIMS

The slide hurt Germany’s benchmark DAX (.GDAXI: ), which closed 0.2 percent lower, though Britain’s FTSE 100 (.FTSE: ) and France’s CAC40 (.FCHI: ) rose 0.2 and 0.7 percent respectively.

The Thomson Reuters Peripheral Eurozone Countries Index (.TRXFLDPIPU: ) rose 0.7 percent.

New U.S. claims for unemployment benefits fell more than expected last week and the four-week moving average hovered at two-year lows, according to a government report that revived hopes a labor market recovery was under way.

U.S. Treasury prices rose, retracing a dramatic sell-off earlier this week fueled by inflation and deficit fears.

Other macroeconomic conditions also remained favorable. The Bank of England’s Monetary Policy Committee voted to keep interest rates unchanged, though it made no new quantitative easing purchases after its monthly meeting, in line with expectations.

ASML Holding (ASML.AS: ) rose 8 percent after the Dutch chip equipment maker revised its forecast for fourth-quarter bookings to 2 billion euros, from more than 1.3 billion euros previously.

A solid outlook by microchip maker Texas Instruments (TXN.N: ) on Wednesday also helped shares.

But retailer HMV (HMV.L: ) slumped 16.6 percent after it said severe weather was hitting Christmas trade, compounding problems caused by competition from grocers and the Internet.

“From an asset allocation perspective, equities are the most compelling asset class now compared to most government bonds. Also, we have another big fiscal impulse in the U.S. which has brightened the near-term growth prospects for the U.S. economy,” said Klaus Wiener, head of research at Generali Investments.

But the euro zone debt problem kept a cap on gains. Fitch Ratings slashed Ireland’s credit rating, saying the downgrade reflected the additional costs of restructuring and supporting the banking system.

(Additional reporting by Atul Prakash; Editing by David Holmes)

Europe shares up for 4th day at 26-month close high