Red-hot miners help Europe stocks extend new-year rally

Fri Jan 17, 2014 12:47pm EST

* FTSEurofirst 300 up 0.5 pct, hits 5-1/2 year high

* Miners jump 7 pct in week, best weekly gain in 2 years

* Royal Dutch Shell slips following profit warning

* Lipper data shows rising inflows from U.S. investors

By Blaise Robinson

PARIS, Jan 17 (Reuters) - European shares rose on Friday in brisk volumes, extending their new-year rally as expectations of a pick up in global growth prompted investors to buy mining stocks.

Miners were the biggest contributors to Friday's rally in Europe, with Glencore Xstrata up 3.4 percent and Lonmin up 3.1 percent. Rio Tinto, which on Thursday reported big production increases, gained 1.5 percent.

The basic resources sector - hammered in 2013 when it dropped 14 percent - has surged 7 percent so far this week, its biggest weekly gain in two years, propelled by signs of broadening economic recovery, especially in developed countries after years of sluggish growth.

The FTSEurofirst 300 index of top European shares gained 0.5 percent to close at 1,345.02 points, a level not seen in 5-1/2 years.

"We're getting the confirmation that developed economies are turning the corner, which should logically translate into a rebound in corporate profits this year," Barclays France director Franklin Pichard said.

"Investors should see every pull-back on the market as buying opportunities."

Bucking the trend on Friday, oil major Royal Dutch Shell fell 1.1 percent after warning fourth-quarter figures would be significantly lower than recent levels of profitability.

Around Europe, UK's FTSE 100 index rose 0.2 percent, Germany's DAX index added 0.3 percent, and France's CAC 40 gained 0.2 percent.

Peripheral markets extended their brisk rally since the start of the year, with Italy's FTMIB up 0.5 percent, Portugal's PSI 20 up 0.3 percent and Spain's IBEX up 0.1 percent.

So far in 2014, the MIB is up 5.3 percent, the PSI 20 up 8.5 percent and the IBEX up 5.5 percent, strongly outperforming a 2.2 percent gain by the broad FTSEurofirst 300.

(Europe indexes in 2014:)

"European indexes have entered a new phase of bull market," Aurel BGC chartist Gerard Sagnier said.

"The buying pressure is strong, while the pull-backs are shallow. There's a nice upside potential for 2014."

A pick-up in the euro zone's macro indicators and a more dovish European Central Bank have prompted investors to scoop up European assets in the past few months, and the trend has extended into the new year.

Investment inflows from U.S. investors into European equities accelerated in the second week of 2014, according to Thomson Reuters Lipper data, signalling further investor appetite for Europe after last year's record inflows into the region.

The Lipper poll of a hundred U.S.-based funds invested in European equities, which include exchange-traded funds' (ETFs) holdings, shows the funds poured $815 million into European equities in the seven days to Jan. 15, nearly twice the pace of the last few weeks and the biggest inflow since late October.

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