European shares hit five-month high

European stocks ended at a five-month closing high on Tuesday after strong manufacturing data from the United States and China boosted investor confidence and helped shift attention away from the eurozone. The FTSEurofirst 300 index of top European shares rose 1.6 percent to 1,028.00 points, its highest close since early August, on volume that was two thirds of the 90-day average.
The STOXX Europe 600 Basic Resources Index jumped 5.3 percent, as copper prices hit three-week highs after expansion in manufacturing activity in the United States and China boosted hopes for stronger metals demand. Heavyweights to gain on Tuesday included BHP Billiton and Rio Tinto, up 6.2 percent and 6.4 percent respectively.
"US data will continue to point to some kind of recovery," said David Coombs, fund manager at Rathbone Brothers, which has 15.2 billion pounds ($23.7 billion) under management. This would continue to boost US stocks, though European stocks with Asian and US exposure might also gain, he said, adding: "It is more of the same", referring to last year when US stocks outperformed with the S&P 500 finishing flat while European shares lost 11 percent.
Other upbeat data included US construction spending in November surging to a near 1-1/2 year high, and unemployment in Germany, Europe's biggest economy, falling more than expected in December. The jobless rate fell to the lowest level since the unification of Germany two decades ago.
Across Europe, Britain's FTSE 100 rose 2.3 percent, to some extent catching up with gains elsewhere in Europe on Monday when London markets were closed. Germany's DAX gained 1.5 percent. The auto sector, packed with German heavyweights, rose 3 percent. Apart from the wider data that was positive for cyclical stocks, German new car registrations rose 6.1 percent in December, according to motor vehicle authority KBA, bucking a trend of falling sales in western Europe.
The pan-European index finished at its high for the day and just below its 200-day moving average at 1,028.13. The index's 14-day relative strength index has risen to 68, with values above 70 indicating that it is 'overbought'. Among individual shares, Afren rose 20 percent, in volumes more than three times the 30-day average, after the Africa-focused energy exploration firm issued an upbeat production report on Monday, when the London market was closed.