* FTSEurofirst 300 up 0.5 pct, sets fresh 5-1/2 yr peak
* Strong UK retail sales bolster sentiment
* Shell falls after surprise profit warning
By Toni Vorobyova
LONDON, Jan 17 European shares edged up to fresh
5-1/2 year highs on Friday, with much stronger-than-expected UK
retail sales reassuring about the strength of the region's
economy and counterbalancing a profit warning by Shell.
British retailers reported the fastest annual sales growth
in more than nine years in December, with activity expanding at
more than double the expected pace.
The data offered much-needed good news on consumer demand
after a crop of disappointing updates by the retailers
themselves, and raised the prospect of Britons buying more goods
from domestic and other European companies in the future.
Chiming in with signs of a consumer pick-up, hotel giant
Accor raised its operating profit goal for 2013, while
jeweller Pandora beat expectations thanks to strong
Accor added 1.4 percent, and Pandora rose 2.9 percent.
Gains in consumer cyclicals helped the broad FTSEurofirst
300 index, which was up 0.5 percent at 1,343.90 points by 1135
GMT. The benchmark, which had started the session
broadly steady, accelerated gains after the UK data, hitting
fresh highs at levels last seen in mid-2008.
Earnings have become a key focus for investors, with
analysts saying that a recovery in profits is needed to drive
any further gains in stock prices, given that valuations are
already at multi-year highs.
"Our view is that the positive sentiment and the number of
investors that are behind the curve, and hold a lot of cash, are
going to be forced into being a bit more risk-taking this year,"
said Stephen Walker, head of equities research and market
strategy at Ashcourt Rowan.
"But we wouldn't see markets a bargain ... so it really
comes down to the extent to which companies deliver on earnings
growth. Clearly consumer stocks can do well, but it does seem
like quite a polarised thing - rather than it being good for
everyone, it is good for some and bad for others."
Underscoring the risks, shares in heavyweight Royal Dutch
Shell fell some 2.3 percent after the oil major warned
that fourth quarter figures would be significantly lower than
recent levels of profitability.
"Shell has broken with its recent custom of disappointing on
earnings day - it is now dishing up the bad news ahead of time
... It highlights the difficulties in forecasting operational
leverage at these oil behemoths," Neill Morton, analyst at
Investec said in a note, forecasting that consensus for 2014 net
income could be cut by around 5 percent.
"The bulls will talk of 'kitchen sinking' and suggest this
will be 'grist to the mill' for the new CEO to restructure the
company. We remain to be convinced."
Shell's warning follows disappointments in the United States
from Intel, Goldman Sachs and Citigroup.
In Europe, the quarterly earnings season does not really
start until next week, but STOXX Europe 600 companies
are seen missing consensus by 0.4 percent on revenues and by 0.9
percent on earnings, according to StarMine SmartEstimates, which
focus on the predictions by the most accurate analysts.
The biggest disappointments are expected from telecoms,
utilities and technology stocks.
"People are mainly looking at where earnings are going after
lots of disappointing earning in the U.S. last night. There is
lots of talk about a correction coming up. I still think
underlying sentiment is good, but we probably will have a bit of
a fall back," said Neil Marsh, strategist at Newedge.