European shares keep brisk 3-week rally alive

Wed Dec 12, 2012 4:39am EST

* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 up 0.1 pct
    * Charts show most benchmark indexes 'overbought'

    By Blaise Robinson
    PARIS, Dec 12 (Reuters) - European shares edged higher in
early trade on Wednesday, extending a steep three-week rally as
investors bet the Federal Reserve will unveil a new round of
bond-buying to support the U.S. economy.
    Charts showing a number of benchmark indexes are ripe for a
short-term technical correction helped limit gains.
    At 0912 GMT, the FTSEurofirst 300 index of top 
European shares was up 0.1 percent at 1,140.32 points, a level
not seen for 18 months. It has surged about 7 percent since
mid-November.
    "The market is getting 'overbought', which doesn't happen
very often. We're ripe for at least a pause, and maybe a
pull-back," said Kepler Capital Markets trader Patrice Perois. 
   "Volumes have been extremely low, which means that the rally
remains fragile regardless of the newsflow."
    Charts show the FTSEurofirst 300 - along with UK's FTSE 100
index, Germany's DAX, France's CAC 40 
and the euro zone's blue chip Euro STOXX 50 -
slipping into 'overbought' territory, with their relative
strength index (RSI), a closely-watched momentum indicator,
above 70.
    The Fed, whose two-day policy meeting ends on Wednesday, is
expected to replace its expiring Operation Twist programme of
Treasuries purchases with a new bond buying plan which will
further expand the central bank's balance sheet. 
      
    
    
    The FTSE 100 index was up 0.2 percent on Wednesday,
Germany's DAX index up 0.3 percent, and France's CAC 40 flat.
    Spain's IBEX and Italy's FTSE MIB, far from being
'overbought' after a recent pull-back, were up 0.5 and 0.6
percent respectively.
    "The rally has reached a point where a lot of market players
have to make a decision," said Guillaume Dumans, co-head of
2Bremans, a Paris-based research firm using behavioural finance
to monitor investor sentiment.
    "The bulls are starting to book profits, the bears seem keen
to keep their positions and the 'neutrals' are torn between
going short at these levels or just waiting for a dip to go
'long'."
    Utility stocks were among the top gainers following recent
sharp losses, with France's EDF up 1.9 percent, Spain's
Iberdrola up 1.1 percent and Italy's Enel up
0.9 percent.
    Mining major Anglo American was the top gainer among
European blue-chips, up 1.7 percent after Barclays upgraded its
rating on the stock to "equal weight" from "underweight".
    European shares have strongly rallied over the past six
months, with the Euro STOXX 50 surging nearly 30 percent,
propelled by significant measures unveiled by central banks to
boost the global economy and fight Europe's debt crisis.
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