UK stock closing: 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