* 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 period.
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 strategy outlook.
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 company.
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, said.
"Markets are still looking for the Santa Claus rally and we are up five days out of five making the bull feel invincible," he said.