EUROPEAN stocks inched up Tuesday morning, adding to a sharp rally in the past four sessions, although trading in the shortened session was thin.
Many stock markets such as Germany, Switzerland and Italy were closed for the Christmas break.
In early trading, Britain’s FTSE 100 index was up 0.4 per cent, France’s CAC 40 up 0.3 per cent, and Spain’s IBEX up 0.5 per cent.
After an hour of trading, volumes were extremely low, representing about 5 per cent of a daily average volume for both the FTSE 100 and CAC 40, and 12 per cent for the IBEX.
Britain’s top shares rose for a fifth session in what is likely to be a quiet day of trade with many investors out already for the Christmas holiday break.
The FTSE 100 was enjoying its longest winning streak since October, having risen almost 4.5 percent from last week’s low and is now in positive territory for the month, up 0.9 per cent.
The index notched a 13.7 per cent rise in 2013 in a year which has seen it scale 13-year highs, now 2.5 per cent above current levels. Traders saw scope for it to continue its ascent into year end.
“I see it drifting a little bit higher… (on) the tapering story that we saw in the U.S. The reaction to that was very positive,” Mark Priest, sales trader at ETX Capital, said.
Jordan Hiscott, senior trader at Gekko Global Markets, also reckons the index will eke out further gains this year, though could struggle to overcome 6,743.
Resistance could come into play at this level, he said, and the 14-day relative strength index (RSI), a momentum indicator, is moving back up towards overbought territory.
With just a few sessions remaining before the end of the year, European shares have gained about 15 per cent so far in 2013, mostly propelled by central banks’ massive liquidity injections as well as an improvement in economic data from both Europe and the United States.
“The rally should continue next year, Europe still has a big potential for a catch-up rally versus Wall Street,” Saxo Bank sales trader Andrea Tueni said.
While Wall Street’s Dow Jones industrial average and S&P 500 as well as Germany’s DAX trade at all-time highs, other euro zone stock indexes, hammered during the region’s sovereign debt crisis, are still well below highs hit in 2007.
France’s CAC 40 is still about 32 per cent below peaks seen before the global financial crisis, while Spain’s IBEX is down 39 per cent and Italy’s FTSE MIB down 58 per cent.
As fears over Italy and Spain receded in 2013 and volatility dropped, European equities saw a return of investment flows from global investors in the second part of the year.
According to data from fund-tracking EPFR Global, European equity funds have enjoyed net weekly inflows in the past 25 weeks in a row.
In the week ending December 18, even as investors pulled $3.4bn from global equity funds in the run-up to the U.S. Federal Reserve’s decision to start trimming its massive stimulus, investors continued to pour in money into European stocks, EPFR data showed.