European shares gain in year-end rally; trade thin

By Harpreet Bhal

LONDON (BestGrowthStock) – European shares ended higher on Wednesday, extending a year-end rally and putting equities on track to post their biggest monthly gain in 17 months, though trading volumes remained low.

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top shares closed 0.2 percent higher at 1,142.98 points on a volume of just 40 percent of the index’s 90-day average.

The benchmark has gained 7.1 percent so far in December, on course to record its biggest monthly gain since July 2009.

So far this year investors have backed riskier assets, with copper, gold and the U.S. over-the-counter Nasdaq index (.IXIC: ) among the biggest winners in 2010.

“Traditionally December is a good month for equities and we have also seen strength in commodities such as gold, copper and oil, which has lifted a number of major blue-chip stocks,” said David Jones, chief market strategist at IG Index.

Among individual movers, Skanska (SKAb.ST: ) rose 2.2 percent after the Nordic region’s biggest construction group unveiled the sale of its stake in a highway concession in Chile, paving the way for a possible extraordinary payout to shareholders.

Within the sector, Balfour Beatty (BALF.L: ), Lafarge (LAFP.PA: ) and Vinci (SGEF.PA: ) rose 1.6 to 1.7 percent.

MINERS STRONG

Miners Xstrata (XTA.L: ), Kazakhmys (KAZ.L: ) and Vedanta Resources (VED.L: ) added 1.6 to 2 percent as copper prices hovered near record highs, with a rate rise in top consumer China failing to quell the metal’s record run.

Randgold Resources (RRS.L: ) was up 3.4 percent as gold prices climbed to a near-two week high to close in on a tenth consecutive yearly gain.

Rio Tinto (RIO.L: ), however, fell 0.5 percent after declaring force majeure on some coal sales contracts due to heavy rains at collieries in Australia’s Queensland state.

Across Europe, Germany’s DAX (.GDAXI: ) rose 0.3 percent and France’s CAC40 (.FCHI: ) gained 0.8 percent, but Britain’s FTSE 100 (.FTSE: ) shed 0.2 percent.

London shares were trading for the first time since Christmas and to some extent were catching up with the decline on mainland Europe earlier in the week, partly due to China’s move to raise interest rates on Christmas Day.

Analysts said the market was expected to hover in narrow trading ranges in the remaining days of the year as investors were avoiding strong bets.

“The first few days of the new year will be good as a lot of new money will flow into the market, but people will become cautious again,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

“You will have question marks on how the U.S. economy is going to react in 2011 to the stimulus package,” Gijsels said. “There will also be questions about the debt situation in Europe and growth in emerging markets.”

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

European shares gain in year-end rally; trade thin