European shares inch higher in pre-Christmas trade

By Atul Prakash

LONDON (BestGrowthStock) – European shares ticked higher in holiday-thinned business on Friday, though were on track to post the best December in a decade and analysts said the market had potential to advance in the remaining days of the year.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares ended 0.1 percent higher at 1,147.49 points on Christmas Eve to stay just below Thursday’s 27-month high. It is up 7.5 percent in December, on track for the best month since July 2009 and best December since 1999. It has risen 9.7 percent this year.

“The prolonged Santa rally has left the market looking strong ahead of the holidays and there is still the potential for further gains before the end of the year,” said David Jones, chief market strategist at IG Index.

“The start of next year could be a different story though — January has been a difficult time for stock markets in recent years and this one may be no different, with investors bracing themselves for potentially poor updates from retailers following the bad weather.”

Trading was thin, with volumes on Britain’s FTSE 100 (.FTSE: ) and France’s CAC 40 (.FCHI: ) just 8.2 percent and 9 percent of their 90-day daily average. Many markets, including Germany, Italy, Spain and Switzerland, were closed.

Equities have lately been buoyed by expectations of a brighter economic outlook in the United States after further stimulus and continuing strength in China and India.

But some were cautious.

“I am not on the same camp as many investment banks that think we will have a fantastic 2011. We’ve got problems, we’ve got sovereign debt issue. On the peripheries, there are still issues that are outstanding that can clearly come back quite easily,” said Jawaid Afsar, a trader at Securequity.

Fitch on Thursday cut Portugal’s rating by one notch to A-plus, with a negative outlook. Still, the downgrade puts Fitch’s rating two notches above that of Standard & Poor’s A-minus. Portugal’s share index (.PSI20: ) was flat, while Banco BPI (BBPI.LS: ) fell 0.4 percent.

Randgold Resources (RRS.L: ) shed 4.3 percent after it said fourth-quarter output would be negatively hit by the impact of the political tension in Ivory Coast and a below-target contribution from its Loulo project in Mali.

Across Europe, the FTSE 100 rose 0.2 percent in a shortened session, though it was still set for its strongest run into the festive period since 1987. The CAC 40 lost 0.3 percent.

(Additional reporting by Dominic Lau; Editing by Andrea Ricci)

European shares inch higher in pre-Christmas trade