* FTSEurofirst 300 index up 0.6 pct
* Italy gains after Italian bond auction
* Tesco cheers as consumers spend
By Joanne Frearson
LONDON, Dec 28 European shares rose on
Wednesday in a low volume rally after investor sentiment was
given a boost as short-term debt costs halved at a debt auction
in Italy and improved confidence about demand for Thursday's
Italian long-term bond sale.
Low volume made movements choppy and shares earlier dipped
into negative territory on concerns about demand for the
auction, before recovering as a closely-watched technical
indicator suggested "oversold" conditions.
The Relative Strength Index (RSI) for the euro zone's blue
chip Euro STOXX 50 index slipped to 21.17 on the
intraday minute chart. A reading of 30 or below is considered
The market continued gaining after the auction, with
Italian bank Intesa Sanpaolo ISP.MI, whose movements are highly
correlated to bond yields, up 1.6 percent and featuring as a top
performer, while the Italian FTSE MIB gained 0.9
The short-term auction helped to ease investor worries that
thin liquidity would make Thursday's sale of up to 8.5 billion
euros of longer-term Italian bonds difficult.
Analysts also said a new austerity package and cheap
long-term liquidity from the European Central Bank helped
improved investor sentiment.
"There is a slightly better supportive tone to the bond
markets in the euro zone and I should expect tomorrow's auction
should be favourable," Mike Lenhoff, chief strategist at Brewin
"Italy has been directing itself towards getting austerity
measures in place which has been improving sentiment and the ECB
cheap money to banks is a plus as it can be used to support the
But 10-year Italian bond yields still remain
at high levels and dangerously close to 7 percent, roughly the
threshold beyond which other euro zone governments have been
forced to seek bailouts.
Markets are likely to get increasingly nervous if yields
stay above that level for a prolonged period when trading picks
up early next year.
"Investors are acutely sensitive to Italy's ability to
maintain market access, so it's not surprising that even during
the Christmas lull the main event for the markets is a pair of
Italian bond auctions," Nicholas Spiro, managing director of
Spiro Sovereign Strategy in London.
"Given the scale of its funding requirements, there are
still big concerns about Italy's ability to get through 2012.
Next quarter is going to be all about Italy."
By 1231 GMT, the pan-European FTSEurofirst 300
index of top shares was up 0.6 percent at 996.05 points, after
being as low as 985.31. But volume was only 16 percent of the
90-day daily average.
UK retailers were among the best performers, with Tesco
rising 2.5 percent, taking the top spot on the
FTSEurofirst 300 index, after market researcher
Experian said key post-Christmas sales, were similar to 2009.