European shares close higher again

European equities advanced for a second straight session yesterday, boosted by mining shares, after US reports showed November retail sales rose more than expected and consumer sentiment improved in early December.

The FTSEurofirst 300 index of top European shares closed 0.5 per cent higher at 1,010.16 points, but fell 1.5 per cent this week after gaining 2.6 per cent last week.

The index is up 21 per cent this year and has surged 56 per cent since hitting a record low in March.

Investor appetite grew for risky assets such as equities, with the VDAX-NEW volatility index falling six per cent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher the market's desire to take risk.

Miners were among the top gainers, helped by firmer metal prices which rose on data showing Chinese industrial output soared in November - the fastest pace since June 2007, highlighting the economy's recovery from the global downturn.

Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose between 0.1 per cent and 0.8 per cent. Global miner BHP Billiton, Anglo American, Antofagasta, Rio Tinto and Xstrata rose 1.3 to 1.8 per cent. "The stock market is in a good shape today... triggered by good economic data," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

"We have no selling pressure. I think December will be a good month for equities. The underlying trend is further on the upside," Mr Amato added.

Robust data raised hopes that a self-sustaining economic recovery was starting to unfold. Total US retail sales rose 1.3 per cent last month, the largest advance since August, after rising 1.1 per cent in October. It was the second straight monthly gain, beating expectations for a 0.7 per cent gain.

Reuters/University of Michigan Surveys of Consumers said sentiment improved in early December on signs of stabilisation in the labour market and widespread discounts to entice holiday shoppers. Chemical companies were also in demand. Bayer, Umicore, BASF, Akzo Nobel and Linde rose 1.8 to 3.9 per cent.

"Equities are in a sweet spot and this could last for a few months, with economic growth returning while central banks remain very cautious," said Jean-Marie Mercadal, chief investment officer of OFI Asset Management in Paris.

"There has been a bit of hesitation since September, but the environment remains positive for stocks, which will also be supported by strong inflows in the asset class, as well as the return of mergers and acquisitions."

But financial shares came under pressure. AXA fell 1.6 per cent. Sources with direct knowledge of the matter told Reuters the French insurer had put the auction of its stake in China's Taikang Life on hold on growing concerns that some potential buyers may be restricted under rules proposed by the insurance regulator.

Shares of major European bank stocks, hurt this week by fears over public finances of Greece and Spain, remained weak.

HSBC, Barclays, Lloyds, Royal Bank of Scotland, Natixis and UBS fell one to 3.4 per cent.

Spanish and Greek banks also fell, with Banco Santander down 0.8 per cent, BBVA down 0.7 per cent, Piraeus Bank down 6.8 per cent and National Bank of Greece down 6.1 per cent.

Dutch bancassurer ING was up 1.6 per cent after it said it will repay €5 billion in state support on December 21, confirming its announced plans and fuelling speculation it may secure better terms on the remainder of its government aid.