European shares hit six-month high

European shares hit a six-month high on Thursday, boosted by cyclical stocks such as miners and banks, as strong data from the United States and the overnight US Federal Reserve commitment to an easy monetary policy boosted market sentiment.
Mining shares, which generally perform well during prosperous economic conditions, were the top gainers, followed by peers in the autos, construction and bank sectors on hopes a recovery in the global economy will help buoy earnings.
"The Fed has used every weapon in its arsenal to maintain a recovery in the United States. That should not only be positive for the US, but also for the global economy and sentiment," Henk Potts, equity strategist at Barclays Wealth, said. Optimism emerged after the Fed's statement to keep interest rates near zero at least until the end of 2014 and as figures showed new orders for US manufactured goods rose in December, a gauge of future business investment rebounded, and new claims for jobless benefits rose only moderately last week.
The STOXX Europe 600 Basic Resources index rose 3.3 percent, tracking stronger metals. The European auto sector rose 2.7 percent, construction shares climbed 1.9 percent, and the banking index rose 1.5 percent. Greek bank shares surged nearly 19 percent on expectations that talks on a bond swap scheme to lighten the country's debt load would be successful.
The FTSEurofirst 300 index of top European shares finished 1.2 percent firmer at 1,051.72 points, the highest close since August. The index, which fell 10.7 percent in 2011, is up 5 percent this year. "The index has just validated a continuation in its trend. Intra-day oscillators are reversing up from their oversold territory. The configuration is positive," Nicolas Suiffet, technical analyst at Trading Central, said.
Some other pointers signalled an improvement in sentiment. The Euro STOXX 50 volatility index fell 4 percent after six-month lows, indicating a rise in investors' risk appetite. The 30-day implied volatility for Germany's DAX and France's CAC-40 further fell to 20.3 percent and 21 percent respectively on Wednesday, against a high of 35.6 percent and 36.2 percent about two months ago, pointing that investors were gradually turning bullish on the market. "Investors should increase their risk profile at the moment, given the fact that fundamentals remain supportive and the macro position is improving. They should appreciate that there are tremendous long-term opportunities," Potts of Barclays said.
"In the face of the current rally, investors should bear in mind the latent potential of a backlash. The European debt crisis is still not solved and Portugal gives new reasons to worry," said Gregor Kuhn, economist at IG markets.
Portuguese five- and 10-year government bond yields were marked at euro-era highs on worries it may follow in Greece's footsteps and require a second bailout or restructure its debt.
Across Europe, Germany's DAX rose 1.8 percent, France's CAC 40 gained 1.5 percent, Spain's IBEX rose 1.9 percent and Portugal's PSI 20 was up 1 percent. Among individual movers, French retailer Carrefour rose 7.5 percent on hopes respected retail veteran Georges Plassat could soon take the helm of the struggling company.