European shares edge higher in choppy trade

Fri Nov 30, 2012 6:06pm IST

* FTSEurofirst 300 up 0.2 percent

* Euro STOXX 50 poised for more gains - Trading Central

* HeidelbergCement, LVMH, Intertek rise after upgrades

By Tricia Wright

LONDON, Nov 30 (Reuters) - European stocks crept higher on Friday, trading around multi-month highs in a choppy session against a backdrop of conflicting signals about U.S. budget talks.

The FTSEurofirst 300 was up 0.2 percent at 1,124.55 by 1206 GMT, having dipped as low as 1,119.66, with thin volumes, at around a third of the 90-day daily average, exaggerating the market's moves.

The index jumped 1.1 percent on Thursday to its highest close since July 2011 on expectations U.S. politicians would reach a deal to stop the world's biggest economy falling off a 'fiscal cliff' of tax rises and spending cuts.

But House of Representatives Speaker John Boehner dampened investors' optimism after the European market close, lowering hopes of a budget deal soon and sending U.S. shares temporarily lower.

"Any sort of semblance of good news is treated favourably, and any drip feed of bad news initiates a negative reaction ... I think the impact on markets is going to be magnified over the coming weeks because December is traditionally a period of thin volumes," said Oliver Wallin, investment director at Octopus Investments, which manages nearly $5 billion.

"It's very difficult to second-guess what's going on. I think the odds are in favour of some kind of resolution, some kind of agreement."

The Euro STOXX 50 was 0.3 percent higher at 2,589.11 points, within touching distance of the upper end of a 150-point range seen since early September, with some technical strategists saying the index was poised for further gains.

Trading Central analyst Philippe Delabarre targets 2,610, around the year's high, with his positive view fuelled by the index's bounce on Wednesday off a declining trend line drawn from September, and this week's bullish gap, which allowed it to push above Tuesday's top.

"The markets are obviously getting a bit more sanguine about (the fiscal cliff situation) day by day," said Andrew Milligan, head of global strategy at Standard Life Investments, which has 163.4 billion pounds ($262 billion) of assets under management.

"That may just be the calm before the storm, but the impression I get is that people think, yes, they will sort it out eventually."

BROKER LIFT

Broker recommendation changes were behind a number of share price moves on Friday.

HeidelbergCement was among the top FTSEurofirst 300 risers, up 2.8 percent, as Morgan Stanley upgraded its rating for the firm to "overweight", making the stock its top Building & Construction sector pick for the near term.

Overall Morgan Stanley cut its stance for the sector to "in-line" on a strong year-to-date performance and a less positive global outlook, while downgrading its rating for HeidelbergCement's Italian peer Buzzi Unicem to "underweight", citing a higher valuation and lower cash generation for the near-term owing to operating losses in Italy. Buzzi Unicem shares shed 1.4 percent.

French luxury group LVMH saw a good rise, ahead 3.1 percent after Goldman Sachs upgraded it to 'buy' from 'neutral', forecasting an improvement in demand from China.

Meanwhile, British testing, inspection and certification firm Intertek Group advanced 1.2 percent, with Berenberg lifting its stance on the stock to "buy".

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