Lift in mining stocks helps boost Europe

EUROPEAN shares ended higher on yesterday, with heavyweight mining shares boosted by rising metals prices and bid interest in Capital Shopping Centres lifting the real estate sector.

The pan-European FTSEurofirst 300 index of top shares ended 0.5 per cent higher at 1,092.80 points, though trading was light as US markets were closed for the Thanksgiving Day holiday. The STOXX Europe 600 basic resources index gained 2.1 per cent, as metals prices were boosted by a weak dollar and upbeat US economic data in the previous session.

However, worries over the Eurozone debt troubles persisted, putting pressure on some peripheral Eurozone banking stocks, with investors concerned about the risk of Ireland’s debt problems spilling over into Portugal and Spain.

Allied Irish Banks tumbled 5.9 per cent, while Spain’s Banco Popular and Portugal’s Millennium bcp shed 0.6 and 0.8 per cent, respectively.

“The tensions in the Eurozone are still an important factor for equity markets, and these tensions have led to a very strong diverging performance among national equity markets,” said Tammo Greetfeld, equity strategist at UniCredit Group in Munich.

“The DAX is continuing to show strong signs of relative strength due to good fundamentals compared to other markets. The Spanish market, for instance, is increasingly under pressure as bond yields in Spain are rising.”

A parliamentary by-election in Ireland today is expected to cut the government’s majority to just two seats, increasing the risk that the 2011 budget, a key step in its plans to address its debt crisis, might not make it through parliament on 7 December. “The debt crisis has to be resolved fast, otherwise confidence is going to slip. At that point, no economic data will help, and we will have a serious correction,” said Koen De Leus, strategist at KBC Securities.

German steelmakers ThyssenKrupp and Kloeckner gained 4.1 per cent and 7.4 per cent, respectively, after analysts said European market conditions were improving. UBS raised its price target for ThyssenKrupp, while Goldman Sachs increased its target for Kloeckner.