* FTSEurofirst 300 up 0.4 percent
* Banks gain; UBS firm despite Libor probe fine
* Merck big faller on Stimuvax setback
By Tricia Wright
LONDON, Dec 19 European shares scaled fresh
18-month highs on Wednesday, boosted by banks, as expectations
built that a budget deal will be reached in Washington.
The FTSEurofirst 300 was 0.4 percent firmer at
1,142.49 by 1224 GMT, trading at levels not seen since June
2011, with a slightly better German business climate index for
December further helping sentiment.
Economically-sensitive banks were among the best
off, with the sector under the spotlight after UBS
agreed to a $1.5 billion fine in order to settle charges of
manipulating the Libor interbank lending rate.
The penalty, the second-largest fine paid by a bank, was in
line with expectations, and shares in UBS rose 1.3 percent to
levels not seen in 17 months following the news which traders
said removed a major uncertainty.
"Investors see this as paving the way for a brighter future
- the effects of the settlement have clearly been factored in
already," Mike McCudden, head of derivatives at Interactive
Volume in UBS stood at 70 percent of the 90-day daily
average, against that for the FTSEurofirst 300 at 48 percent.
Traders said financial stocks also received a fillip from a
sector upgrade to "overweight" by Credit Suisse in its Global
Equity Strategy 2013 outlook.
In an otherwise quiet day in terms of corporate newsflow,
Merck KGaA was among the top FTSEurofirst 300 fallers,
off 3.2 percent, after the company said its cancer vaccine
Stimuvax failed to meet a goal of improving survival in lung
The optimism brewing over signs of progress in heading off a
"fiscal cliff" of growth-curbing austerity measures alongside
expectations for more monetary stimulus from the Bank of Japan
took world stock markets to 17-month highs on Wednesday.
A budget deal could give further impetus to a Christmas
rally in equity markets that has become something of a
tradition, with the FTSEurofirst 300 having notched up a monthly
gain in December 12 times in the last 15 years.
"Generally the biggest impact at this time is seasonal so
excess cash tends to be put into the market for the year end,"
Lucy MacDonald, CIO Global Equities at Allianz Global Investors,
which manages around 300 billion euros ($400 billion).
"On balance... you would expect the market to carry on going
up towards the end of the year."
The euro zone's blue-chip Euro STOXX 50 was up
0.5 percent at 2,657.48, its highest level since August 2011.
Barclays Capital technical analyst Lynnden Branigan,
encouraged by the Euro STOXX 50's close on Tuesday above the top
of a range seen over the past week, targets 2,709 - the
intra-day peak hit on Aug. 1 2011 just prior to a market
downturn - in the run-up to year-end.