European shares gain

European shares rose in thin volume on Thursday as technical factors pointed to oversold levels, while a Spanish bond auction produced good demand and US data helped improve sentiment on the global economy. Investors bought stocks after the eurozone's blue chip Euro STOXX 50 index hit oversold territory after falling near its 61.8 percent Fibonacci Retracement from a rally that began in November at 2,194.35 points on Wednesday.
Old Mutual was the biggest gainer, up 11.4 percent in volume more than twice its 90-day daily average, after the insurer said it would sell its non-core Nordic business to Skandia Liv, a move which would boost returns for shareholders. Market sentiment also improved after a Spanish bond auction sold more than expected and extended gains after US weekly jobless claims dropped to their lowest level since May 2008, boosting hopes the economy was improving.
"We have some respite through a good auction and of course the US data has been reasonably supportive," said Richard Batty, strategist at Standard Life Investments, part of the Standard Life Group which administers $303.32 billion of assets. But borrowing costs remained high at the Spanish auction and with policymakers yet to come up with an adequate solution to the euro zone debt crisis, fund managers were wary about changing asset allocation.
"We still do not have a policy roadmap in place which enables Europe to avoid a slowdown and get back on track. We have not changed our asset allocation around and are underweight European equities," Batty said. The FTSEurofirst 300 index closed up 1 percent at 961.75 points after falling 2.1 percent in the previous session to hit a two-week low. The index is on track to end the week 2.4 percent lower.
Volume was light at 84.6 percent of its 90-day daily average, also exaggerating movements on the index. Europe's blue chip stock index is likely to end the week firmly in the red, weighed by futures trade as the market gears up for December options expiry on Friday, with the potential for further declines in the weeks ahead.
Futures volumes have outpaced cash sharply in recent sessions by as much as 6 to 1, traders say, impacting the cash market as arbitrage desks look to adjust their cash baskets to compensate for the move. Throughout Thursday's session, the Euro STOXX 50 has traded in a 2,206.62 to 2,244.49 range. "A lot of protection lies at 2,250 and 2,200 in the Euro STOXX, therefore dealers who have provided these puts as protection to investors need to be selling futures on the way down," Mike Pringle, global head of equity trading at Citi, said.