European shares at 18-mth highs on strong German data

Last Updated: Tue, Dec 11, 2012 16:40 hrs

LONDON, Dec 11 (Reuters) - European shares rose on Tuesday, with a key index scaling fresh 18-month highs thanks to signs of improvement in the German economy and traditional year-end flows into equities.

Sectors dependent on solid economic growth - such as autos , construction and basic resources - outperformed after the ZEW indicator pointed to a sharp improvement in German investor morale this month.

The upbeat news from Germany - seen as the strong spot in Europe - fed into broader seasonal optimism in equity markets, which have posted December gains in 12 of the last 15 years.

"We are enjoying the seasonality now. In equity markets in December, the trend is to the upside," said Veronika Pechlaner, investment manager at Ashburton, which is 'overweight' on Europe.

"We have seen some global allocators moving funds into Europe and that is clearly an environment that has helped. But it's clearly vulnerable to any set backs."

The pan-European FTSEurofirst 300 provisionally closed up 0.4 percent at 1,139.17 points, its highest finish since mid-2011 and taking its gains for the past three weeks to 7 percent.

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