LONDON, Jan 2 (Reuters) - A last-minute U.S. budget deal
sent European shares to 20-month highs on Wednesday, pushing
some regional indexes into "overbought" territory and leaving
them vulnerable to a pullback.
The agreement to postpone steep austerity measures in the
world's largest economy triggered a rally in assets that depend
on economic activity, such as equities, but the deal was only a
partial fix to the country's budget woes.
The pan-European FTSEurofirst 300 index
provisionally closed 2 percent higher at 1,156.20 points on the
first trading session of the year, led by shares in the cyclical
basic resources sector.
Further U.S. political showdowns are expected over the next
two months, however, all of which could dent investor sentiment
and result in increased share price volatility.
"We'll see a few more days of euphoria but then the reality
will set in," said Mike Turner, head of global strategy and
asset allocation at Aberdeen Asset Management, adding he would
sell futures contracts on major indexes at the first sign of
fresh political jitters.
The euro zone Euro STOXX 50 and Germany's Dax
moved into "overbought" territory on their 20-day
Relative Strength Index, a momentum indicator, meaning that some
short-term sellers may start to take profit on the indexes in
the coming days.