* FTSEurofirst 300 ends 0.2 percent higher
* Pan-European index closes off 17-month high
* Euro STOXX 50 fails to breach 2,600 resistance
By Atul Prakash
LONDON, Dec 3 (Reuters) - European shares hit a 17-month
high but gave up most gains in a late sell-off on Monday after
disappointing U.S. manufacturing data and on persistent concerns
about the fiscal standoff in the United States.
Stocks may stay choppy until the New Year as volumes usually
fall late in the year, while negotiations on the U.S. "fiscal
cliff" of spending cuts and tax rises from January are set to
But analysts said the medium- to longer-term outlook for
equities remained positive and further gains were likely next
"There are signs that the global economy is consolidating.
China is stabilising and Europe's fiscal problems seem not as
bad as they appeared earlier. But the main immediate concern is
the U.S. fiscal cliff. I am cautiously optimistic," said
Christian Stocker, equity strategist at UniCredit in Munich.
A survey showed U.S. manufacturing unexpectedly contracted
in November, showing its softest reading since July 2009, in the
wake of superstorm Sandy that hit the U.S east coast in late
"I am not too concerned about the U.S. manufacturing data,
which might have been influenced by the storm. Other recent U.S.
indicators have shown that the economy is recovering," Stocker
The U.S. report came after purchasing managers indexes
(PMIs) suggested China was regaining its vigour going into 2013,
while the fall among the euro zone's embattled factories eased
The FTSEurofirst 300 index hit a 17-month high of
1,128.65 points in the morning session before closing well below
its intraday high.
The index, which finished 0.2 percent higher at 1,121.15
points, is still up 12 percent so far this year and has surged
18 percent since a multi-month low in June, partly on recent
encouraging global economic data.
The euro zone's blue chip Euro STOXX 50 index
ended 0.3 percent higher at 2,582.36 points after failing to
stay above key resistance at 2,600 - its September high.
"The index looks toppish and further short-term pullbacks
are possible," Roelof-Jan van den Akker, senior technical
analyst at ING Commercial Banking, said.
"Within the index's 50-day moving average (of 2,510) and last
week's gap between 2,549 and 2,559, you should expect the
development of a higher bottom from where the next rally to
break the strong resistance at 2,600 could start."
LONG-TERM OUTLOOK POSITIVE
Analysts said the market had potential to scale new highs as
sentiment had improved, economic indicators were stabilising and
equities were still cheaper.
A Reuters poll showed that global investors raised their
equity overweight positions to a 20-month high last month, while
EPFR Global data showed equity funds across the world recorded
inflows of $14.86 billion in the week ending Nov. 28, their
second highest total year-to-date.
Nomura predicted double-digit returns on European equities
in 2013 on improved global growth and attractive valuations.
According to Thomson Reuters Datastream, the broad STOXX 600
is trading at 11 times its 12-month forward earnings,
while Wall Street's S&P 500 trades at 12.5 times, well
below their 10-year average of 12.3 and 14.2 respectively.
Goldman Sachs' asset allocation team said in a note that
improved earnings and returns relative to other assets made
global equity markets attractive and justified an upgrade to
"overweight" from "neutral" on a three-month view, although
sluggish growth in Europe made it relatively less attractive.
Analysts said the situation in Europe was improving and the
concern of a euro zone breakup had greatly diminished. There
were signs of progress made by Greece in making its debt
sustainable, while Spain made a formal request for bank bailout
funds from the European Union.
"The formal request is nothing of a surprise of course given
the fact the country had already informally requested bailout
funds for its banks. My hunch is the formal request provides
further clarity and this could be well received by investors,"
Joshua Raymond, chief market strategist at City Index, said.
Among individual movers, Mediaset rose 6.7 percent
on the back of short-covering, as speculation over a possible
partnership involving Italy's largest commercial broadcaster
continued, according to Milan-based traders.