* FTSEurofirst 300 index closes 0.4 percent higher
* Cyclicals among top gainers, autos up 2.2 pct
* Key stock index faces stiff resistance
By Atul Prakash
LONDON, Aug 6 (Reuters) - European shares closed at their
highest level in more than four months on Monday, with cyclical
shares driving gains on the back of recent U.S. economic data
and hopes for fresh policy actions to help debt-market
strugglers Spain and Italy.
Sectors linked to growth such as autos and construction rose
after strong U.S. jobs data on Friday and growing expectations
of fresh action from the European Central Bank to ease funding
pressures in the peripheral euro zone buoyed risk appetite.
"It's not the time to be underweight equities," said Didier
Duret, chief investment officer at ABN-AMRO Private Banking,
which manages more than $200 billion.
"The markets are embarking on hopes to see some progress on
the European situation and that the ECB has stated a ... road
map to support Spain and Italy. We are in an environment where
it seems the U.S. economy is bottoming out. If confirmed, it
will be matched by an outperformance of cyclical shares."
Spanish shares, which were halted for several hours
due to a technical glitch, rose 4.4 percent, while Italy's FTSE
MIB gained 1.5 percent on expectations that any support
from the ECB to lower borrowing costs will help the economy.
The prospects of a policy move prompted investment bank
Jefferies to advise investors to bet on the outperformance of
IBEX by going 'long' on the index.
The FTSEurofirst 300 index ended 0.4 percent firmer
at 1,085.79 points, the highest close since late March. Trading
remained thin in the summer holiday season, at 82 percent of its
90-day daily average.
Stocks traditionally seen as cylcicals were in demand, with
the STOXX Europe 600 auto index up 2.2 percent, euro
zone banks up 2.8 percent, construction shares
rising 1.7 percent and miners advancing 1.3 percent.
"If you get some decent news from China, mining stocks will
get another push," said Daniel Harris, head of dealing at H2O
Markets, adding equities had already gained on hopes the ECB
would do whatever needed to avoid any collapse of the euro zone.
A Reuters poll showed Chinese factory output and fixed-asset
investment should show a modest recovery taking hold in July,
with easier inflation likely to give the government more room to
tweak policy settings to underpin growth. Industrial production,
alongside retail sales and inflation data, is due on Thursday.
Harris said the market might struggle to make further strong
advances in the near term in the absence of more catalysts,
while technical analysts said a major stock index faced a stiff
The euro zone blue chip Euro STOXX 50 index rose
1.1 percent to 2,399.32 to close just below a key level of 2,400
points, which proved to be a strong resistance, as was seen in
December 2011 and January 2012.
"Given the slow stochastic momentum oscillator entering the
overbought region, the test of the 2,400 seems to see a pull
back to the 2,335 and 2,300 support region, where the next big
move would likely to be determined," Dmytro Bondar, technical
analyst at RBS, said.
"Alternatively, a sustained break above 2,400 would be a
signal for further price advance."
Investors kept a close eye on the second quarter earnings
season for near-term direction. Thomson Reuters StarMine data
showed that about 65 percent of Europe's STOXX 600
firms had reported results so far, of which 50 percent companies
had met or beat forecasts, while the rest missed the estimates.
Companies that make money outside Europe outperformed, with
Richemont rising 5.2 percent after the Swiss-listed
luxury goods maker said its first half net profit could rise by
as much as 40 percent, helped by demand from emerging markets
and sales to Asian shoppers visiting Europe.