Commods push European shares up as global PMIs support

Mon Dec 3, 2012 7:09am EST

* FTSEurofirst 300 up 0.6 percent

* China manufacturing expands

* Euro zone manufacturers slowdown eases

* Miners, oils lead gainers as demand outlook brightens

* Renault slips as new car registrations fall

By David Brett

LONDON, Dec 3 (Reuters) - European shares were buoyed by commodity stocks around midday on Monday as China's vast factory sector began to expand and the slowdown among euro zone manufacturers eased.

The FTSEurofirst 300 was up 6.42 points, or 0.6 percent, at 1,125.78, holding at the top of its recent range after contraction in activity in the euro zone's embattled manufacturers eased to an eight-month low.

That followed data overnight in China where a survey showed the world's second biggest economy's huge manufacturing sector had expanded for the first time since October 2011.

"It is positive for the whole market that the Chinese economy is doing better than expected," Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank, said.

The data helped propel commodity-related names such as Vedanta and Fresnillo 2.2 percent and 1.4 percent higher as the PMIs lifted the outlook for demand in the sector.

An expected stronger start on Wall Street was also keeping European shares at the top of their range, but the U.S. "fiscal cliff" of some $600 billion in automatic tax hikes and spending cuts remains a big stumbling block.

"I expect some nervous trading on the markets over the next two weeks because the tone out of the U.S. is not very positive, but I do expect (some sort of) solution before Christmas," Sonnenschein said, adding he believed the European equity markets will rally into the first-quarter of 2013.

Growing expectations that lawmakers in the United States will come to some form of "gap" solution has been evident in the recent market rally, which has seen European shares gain more than 5 percent since November lows.

"Sentiment appears to be starting to turn and the thing that is holding markets back is the fiscal situation in the United States... but when you look at everything outside the U.S it looks to be pretty good," Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities, said.

An easing of worries over the euro zone has contributed to helping Euro STOXX 50 Volatility Index, or VSTOXX, Europe's widely-used measure of investor risk aversion, hit a five-year low.

Recent fund flow data has also signaled that investors are starting to dip their toes back into battered euro zone assets after shunning them in the past few years.

The euro zone's blue chip index was up 0.6 percent on the day and is up 11.2 percent in 2012.

Among individual movers, asset manager Schroders gained 2.9 percent with traders citing BofA Merrill Lynch's upgrade to "buy" which the investment bank says reflects an improving tone for asset gathering.

While data suggests investors are gaining in confidence corporates continue to battle away to sustain profits in a tough economic environment.

Belgian discount supermarket chain Colruyt fell 3 percent after its first-half results came in below expectations on pricing pressures late on Friday.

And Renault shed 1.6 percent after French new car registrations fell 19.2 percent in November, led by declines at the carmaker and Japanese partner Nissan.

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