European shares ended the year higher yesterday, making their best annual performance since 1999, with miners tracking firmer metal prices.

The FTSEurofirst 300 index of leading European shares closed up 0.24 per cent at 1,045.76 points and recorded an annual gain of 25.4 per cent this year.

"It has been a belting year. But, 2010 is going to be a different kettle of fish and is likely to be a lot more difficult," said Jim Wood-Smith, head of research at Williams de Broe.

"We will have a year in which interest rates are going to go up rather than come down, we will have a year in which taxes are going to go up and public expenditure across Europe will be cut. The gains we have seen are not going to be repeated," he said.

European stocks surged 62 per cent since plummeting to a record low in early March, propelled by a sharp rebound in cyclical stocks such as the basic resources sector, which has jumped 102 per cent this year.

Miners featured among the gainers yesterday, with copper up 0.6 per cent as a looming mine strike in Chile lifted prices.

Anglo American, Antofagasta, Rio Tinto and Xstrata were 0.5 to 1.8 per cent higher.

Property stocks were in de-mand, with British Land, Land Securities Group and Liberty International up 2.8 to 4.3 per cent.

The FTSEurofirst 300, however, is still down 36 per cent from a multi-year peak reached in mid-2007, before fears over toxic assets on banks' balance sheets dampened investor appetite for risky assets and sparked a financial crisis.

"We could go back to a situation like we had in the second half of the 1970s when the market rose in 1974 and then traded sideways for the rest of the decade due to weakness in the economy," said Geert Ruysschaert, analyst at Fortis Bank in Brussels.

He said that measures, including quantitative easing in the UK, cuts in consumption taxes and subsidies for the auto sector, had been supportive of the economy but that these would not last.

"With all the government measures to support the economy, it's hard to see what is going on in the real economy."

Across Europe, the French CAC rose 22 per cent for the year as did the FTSE 100, its biggest annualised gain since 1997.

Volumes were very thin and markets stayed closed yesterday in a number of European countries, including Germany, Italy, Spain and Switzerland.