European shares hit fresh 2012 peak on U.S. fiscal hopes
* FTSEurofirst 300 up 0.4 percent
* Banks gain; UBS firm despite Libor probe fine
* Merck leads fallers on Stimuvax setback
By Tricia Wright
LONDON, Dec 19 (Reuters) - European shares drifted higher on Wednesday as expectations built that a budget deal in the United States is close, though traders reckoned any positive outcome is already in the price.
The FTSEurofirst 300 was up 0.4 percent, having hit a fresh intra-day 18-month high of 1,141.80 after a slightly better German business climate index for December.
The index added 0.4 percent on Tuesday.
"The market remains firm on continued budget hopes but the bottom line is that 2012 is pretty much done and most people are about to close their books for the year," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million of assets.
World stock markets hit 17-month highs on Wednesday on signs of progress towards averting a "fiscal cliff" of growth-curbing austerity measures and expectations of more aggressive monetary stimulus from the Bank of Japan.
"Even if we do get a (U.S. budget) resolution in the next few days -- and I still don't think it's a done deal; every time they come out and say something positive there are caveats -- I think it is largely in the price," Ian Williams, strategist at Peel Hunt, said.
Banks were the top gainers, with the sector under the spotlight after UBS agreed to a $1.5 billion fine in order to settle charges of manipulating the Libor inter-bank lending rate.
The penalty agreed with U.S., UK and Swiss regulators, the second-largest fine paid by a bank, was in line with expectations, and UBS shares rose 1.5 percent.
"I think the fines for Libor rigging have been priced in for some time now," said Zahid Mahmood, senior dealer at London Capital Group.
"While they are substantial to say the least and they will certainly impact a banking sector that has been under attack for a while, I don't think they will have any material impact to temper the broader rally we are undergoing due to the various economic and political reasons, such as additional central bank stimulus, broader signs showing global economic improvement."
Traded volume in UBS stood at 37 percent of the 90-day daily average, against that for the FTSEurofirst 300 at 20 percent.
Merck KGaA topped the FTSEurofirst 300 fallers' list, off 3.4 percent, after the company said its cancer vaccine Stimuvax failed to meet a goal of improving survival in lung cancer patients.
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