European shares hit their 2013 peak yesterday as signs of growth in economic powerhouse Germany strengthened expectations that the region’s sovereign debt crisis may be easing.

Some strategists have forecast limited gains in the first quarter for European equities, following a strong run in the second half of 2012 after the European Central Bank pledged new measures to tackle the debt crisis which had led to fears of economic implosion.

However, traders said that those betting on a market fall with ‘short’ positions were increasingly cancelling those bets to cover their losses and instead buying, contributing to the market rally.

The pan-European FTSEurofirst 300 index ended up 0.3 per cent at 1,171.06 points – a new closing high for 2013. Earlier in the day, the index had reached an intraday high of 1,171.78 points, its best level since early March 2011.

The eurozone’s blue-chip Euro STOXX 50 index gained 0.5 per cent to 2,722.96 points, with stock markets further boosted after the US S&P 500 index rose above the key 1,500 point level for the first time since December 2007.

PMI business survey data from Germany showed its private sector expanding at its fastest pace in a year this month. But in France it showed a deepening downturn.

Gains at heavyweight telecoms stock Vodafone and the pharmaceuticals company Roche added the most points to the FTSEurofirst 300 index.

Vodafone rose 3.2 per cent, which traders said was partly due to comments from major US hedge fund manager David Einhorn who told investors this week that he had added to his position in Vodafone.

The Euro STOXX 50 index has a current relative strength index (RSI) reading of around 63 points – below the 70 point mark which means an index is in technically “overbought” territory.

The Euro STOXX 50 is also trading above the index’s 200-day and 50-day simple moving average levels, which are further technical indicators to suggest the index has scope for more gains. (Reuters)