European stocks shut near 21/2-year high

European shares edged nearer to two-and-a-half-year highs yesterday tracking Wall Street's gains, but the world's biggest paper maker Stora Enso fell after saying its fourth quarter will be tough.

Meanwhile insurers continued to be dogged by concerns over possible payouts in tsunami-hit Asia. Swiss Re dropped 1.4 per cent to 80 Swiss francs.

Wall Street rose after US consumer confidence rebounded in December to a five-month high as consumers reacted positively to job growth and economic expansion. The index easily surpassed economists' forecasts.

The FTSE Eurofirst 300 index of leading European shares closed just 0.13 per cent higher at 1,042.16 points, although only two points below its recent 29-month high and set to end the year more than eight per cent higher.

The DJ Euro Stoxx 50 index, which tracks euro zone blue chips, inched up 0.37 per cent to 2,955.11 points.

Volumes were depleted with London closed for a public holiday and many investors still on Christmas holidays.

Around Europe, Germany's DAX and France's CAC 40 were 0.6 per cent stronger and the Swiss SMI was 0.02 per cent firmer.

Shares in Europe's paper and forestry groups sagged after Stora Enso said fourth quarter profits have been hit by the weak dollar and high raw material prices.

The DJ Stoxx European basic producers index fell 0.3 per cent and were the region's weakest sector. Shares in Stora Enso fell 2.7 per cent to 11.3 crowns, while those of its peers, UPM-Kymmene and Norske Skog were down about one per cent. Paper and packaging maker Holmen was off 0.9 per cent.

Insurance and travel stocks remained under the cosh; they were hit on Monday as investors tried to assess exposure to southern Asia, where tsunami waves at the weekend killed more than 50,000 people with the death toll still rising.

The deadly waves have caused economic damage in excess of €10 billion, risk research expert Gerhard Berz at Munich Re, the world's largest reinsurer, was quoted as saying. The estimate does not reflect the cost to the insurance industry.

Shares of German travel company TUI fell in Frankfurt, sliding amid worries that the tsunami catastrophe in south Asia would dent earnings as new bookings tapered off and repatriation costs soared.

The stock shed one per cent to €17.6, adding to a one per cent loss on Monday when Europe's largest travel firm had assured investors it saw no major impact on sales and earnings.