European shares closed at a new 29-month high for the fourth straight day on Thursday, edging ahead against a mixed economic and corporate backdrop, with technical indicators suggesting the recent rally may be overdone. The FTSEurofirst 300 index of leading European shares closed up 0.1 percent at 1,187.20 points, its fifth straight day of gains, with top gainer Capgemini and top loser Schindler leading the biggest movers' lists as earnings season continued apace.
A jump in US core consumer prices and a small rise in the country's weekly jobless claims had earlier sent share prices lower before the release of bullish US regional manufacturing data helped recover the losses. "The markets been trading completely sideways and there really hasn't been much excitement at all. It looked like investors were waiting for the US data," said Angus Campbell, head of sales at Capital Spreads.
While weekly jobless numbers were slightly worse than expected, "they're not a huge market mover", he said, and the inflation number was shrugged off after the release of strong sentiment and output data from the Philadelphia Federal Reserve.
"The Philly data was great and showed that manufacturing was leading the US into growth, so that's assisted the market and helped reverse earlier losses," Campbell added. Technicals supported a short-term pull-back for the FTSEurofirst 300, said Charles Stanley analyst Bill McNamara, as the recent strong run had left the index looking overbought on both daily and weekly indicators. "And with Brent Crude pushing $104 (a barrel) it would not be surprising if traders were struggling to find a reason to take it higher from here. That said, the short-term uptrend is still intact and we would need to see a close below 1160 before altering our bullish stance on this index," he added.
Leading stocks to the downside was Swiss liftmaker Schindler, which ended down 6 percent after results that Vontobel analysts called "uninspiring" and a weak outlook. French spirits firm Pernod Ricard was also among the fallers, down 4 percent after it posted results in line with forecasts.
Across Europe, Germany's DAX closed down 0.2 percent but remains in overbought territory, with the 14-day relative strength index at 7.28, while France's CAC-40, which ended flat, is approaching it with a 14-day RSI near 68. In Britain, the FTSE 100 ended flat.
Adding weight to what one trader described as a "risk off day", the VDAX-NEW volatility index rose 8.7 percent to hit a two-week high after trading near a 32-month low in the previous session, while the Euro STOXX 50 volatility index was up 4.2 percent.
The mixed economic picture and smattering of earnings weakness aside, strong results were seen from corporate heavyweights including Nestle, lending support to bulls hoping any retracement would prove temporary. Nestle, the world's biggest food company, rose 0.9 percent after it posted forecast-beating underlying sales growth and said it expected emerging markets sales to offset the impact of commodity price inflation.
Leading shares to the upside, however, was Capgemini, the world's largest computer consultancy, which surged 7.6 percent after it beat earnings forecasts and said it had made a strong end to the year.