European stocks get energy boost

European shares ended higher in choppy, thin trade on Tuesday as firmer oil prices, boosted by rumours of a rise in tension with Iran, helped lift energy stocks. But the market cut about half of its early gains on worries related to Europe's future bailout fund.
Analysts said the euphoria of a deal at last week's European Union summit for deeper economic integration to prevent a future debt crisis had been disappearing, with investors focusing on the lack of a concrete plan to solve the present debt crisis. Jittery investors cut their exposure to equities after sources said Chancellor Angela Merkel had rejected any suggestion of raising the funding limit of Europe's future bailout fund, the European Stability Mechanism (ESM).
"Merkel's comments prompted investors to take some positions off the table very quickly after a very strong run in the recent past. We have started to see lower volumes as well, which make the moves exaggerated," said Joshua Raymond, Chief Market Strategist at City Index.
The FTSEurofirst 300 index of top European shares closed 0.6 percent higher at 972.84 points after rising to a high of 978.94 earlier in the session. Volumes were low, at around three quarters of the 90-day daily average. Analysts said stronger oil prices supported energy stocks and prevented the Europen index ending lower, but overall sentiment was negative and charts also showed a bearish technical outlook.
However, several European stock indexes failed to retain early gains, with Germany's DAX closing 0.2 percent lower, France's CAC-40 down 0.4 percent and Spain's IBEX falling 0.6 percent. "Nothing has been solved in Europe. There are no euro bonds and the European Central Bank is not going to act vigorously," said Koen De Leus, strategist at KBC Securities, in Brussels. The eurozone's blue chip Euro STOXX 50 index fell 0.4 percent to 2,260.98 points. Analysts said it had been in a downtrend after forming a major reversal pattern on December 7 and displaying a bearish divergence of the MACD oscillator.