* FTSEurofirst up 0.1 percent
* Value stocks outperform
* Anglo American up after Barclays upgrade
* Peugeot rallies on government stake talk
* Investors wait for FED decision on twist
By David Brett
LONDON, Dec 12 Peripheral euro zone indexes
helped European shares edge up on Wednesday, steadying after
three weeks of gains but retaining the potential to rise more in
the short term as macroeconomic risks fade.
The FTSEurofirst 300 closed up 0.80 points, or 0.1
percent, at 1,139.65, although volumes were low at just 77
percent of their already weak 90-day daily average. Spain's IBEX
, up 0.6 percent, and Italy's FTSE MIB, up 1.2
percent, led regional gainers.
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 -
heading into 'overbought' territory, with their relative
strength index (RSI), a closely watched momentum indicator,
above 70, which could trigger a pause in the rally.
But Ashraf Laidi, chief global strategist at City Index,
said an expected agreement to postpone the U.S. "fiscal cliff"
of steep tax hikes and budget cuts set for the end of the year,
a reduction in the immediate event risk from the euro zone debt
crisis and continued support from central banks to fuel further
gains on European indexes.
"I think those factors are enough to give us this habitual
year-end rally," Laidi said.
He expects France's CAC and Britain's FTSE 100
to start caching up in the next quarter with the
outperformance of Germany's DAX - up 29 percent in 2012
- which has benefited as a defensive equity market play.
"Gains are likely to spread onto the rest of continental
indices as improving market metrics translate into more
stabilization on the macro front," Laidi said forecasting the
CAC at 3,795 by mid 2013 and the FTSE 100 at 6,000 in the same
On Wednesday investors went in search of value - companies
which look cheap relative to other areas of the market - such as
basic resources and insurers, which outperformed
more highly valued defensive sectors such as heatlhcare
and food & beverage.
"We favour European stocks, including mining companies and
German auto stocks, over the first half of 2013, as the
capitulation into the shunned assets of recent years is
completed," BofA-Merrill strategists wrote in their 2013
Among individual movers miner Anglo American rose
2.7 percent after Barclays upgraded its rating on the stock to
"equal weight" from "underweight".
"We can not recall a greater level of investor interest in
Anglo American than currently, following its more than 30
percent underperformance vs BHP Billiton and Rio Tinto
," Barclays said in a note.
"The fact the big diversified miners don't tend to
underperform by more than 30 percent in any given period, we
feel the risk/reward is turning less negative," it said.
Troubled French car maker PSA Peugeot Citroen
surged 10.1 percent, boosted by a report on La Tribune website
saying the government of Algeria could buy a stake in the
Traders also mentioned a recent move by UK hedge fund
Marshall Wace to reduce its short selling position on Peugeot,
which has been in the crosshairs of short sellers for months.
After the market close investors will be waiting to hear
from the U.S. Federal Reserve with expectations being that it
will opt to pump more money into the banking system.
"At tonight's FOMC meeting, markets will be looking for
Operation Twist to be replaced with open market buying
of Treasuries," Steen Jakobsen, Chief Economist at Saxo Bank,
"Markets are still looking for the Santa Claus rally and we
are up five days out of five making the bull feel invincible,"