European shares were higher at midday on Monday, continuing their New Year rally and briefly touching their highest level since mid-November, with energy stocks leading the risers. By 1130 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top European shares was up 1.4 percent at 868.86 points after earlier hitting a session high of 871.64 points.
Darren Winder, strategist at Cazenove, said: "It is a very different start from January last year, we are clearly coming off one of the worst years in history so we would expect to see a positive start. Investors are trying to be more positive because of the severity of 2008."
"Even though GDP in major countries are expected to go down and unemployment is on the rise, we are now looking at much lower levels of inflation. There has been fiscal stimulus and there is now every reason to be looking at a recovery path in equities," added Winder.
U.S. President-elect Barack Obama is seeking as much as $310 billion in tax cuts as part of a massive stimulus plan to counter what senior policymakers warned could be a prolonged period of economic stagnation and deflation. [ID:nSP346125]
Officials from the Federal Reserve and the European Central Bank on Sunday vowed to fight the damaging effects of deflation as the global economy suffers a deep and lengthy recession. [ID:nN04296451]
Jim Wood-Smith, head of research at Williams de Broe, said: "Plans from Obama and other policy makers are just confirmation of what the markets already know. Markets are higher as the equity valuations we are seeing are very low levels and they have now priced in ghastly economic data."
Energy stocks were one of the top performing sectors on the index. Oil prices rose nearly 3 percent after an Iranian military commander reportedly called for an oil boycott over Israel's offensive in the Gaza Strip, and on worries over the deepening Russian gas supply row.
BG Group (BG.L: Quote, Profile, Research, Stock Buzz), BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSb.L: Quote, Profile, Research, Stock Buzz) and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) were up between 0.6 percent and 4 percent.
Miners were mixed. Although most of the stocks were in the red, Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) and Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) were stand out risers, up 2.7 percent and 2.9 percent respectively.
Electricity stocks were also gainers on the index. British Energy (BGY.L: Quote, Profile, Research, Stock Buzz), EDF (EDF.PA: Quote, Profile, Research, Stock Buzz) and EDP (EDP.LS: Quote, Profile, Research, Stock Buzz) were between 0.3 percent and 2.2 percent higher.
Gas, water and multi-utilities stocks also performed well. RWE (RWEG.DE: Quote, Profile, Research, Stock Buzz) rose 2.1 percent after HSBC upgraded the group to "neutral" from "underweight".
Across Europe, the FTSE 100 .FTSE index was up 0.1 percent, Germany's DAX .GDAXI was 0.2 percent higher and France's CAC 40 .FCHI was down 0.03 percent.
BROKER DOWNGRADES HIT AUTOMOBILES
Biggest loser on the index was the automobiles sector, after broker downgrades hit certain stocks.
Renault (RENA.PA: Quote, Profile, Research, Stock Buzz) fell back 5.1 percent after Citigroup downgraded the group to "sell" from "hold"; BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) lost 1.3 percent as Exane BNP Paribas cut the group to "underperform" from "outperform"; while Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) was down 4.1 percent as Societe Generale downgraded the group to "hold" from "buy".
Back to individual gainers, German chipmaker Infineon Technologies (IFXGn.DE: Quote, Profile, Research, Stock Buzz) gained nearly 12 percent after the group asked shareholders for permission to raise up to 450 million euros ($626.6 million) of fresh capital to bolster its liquidity. [ID:nL527462]
Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) rose 3.8 percent, extending its recent strong run, after Credit Suisse upgraded the mobile phone group to a "trading buy" on New Year's Eve. (Reporting by Joanne Frearson; editing by Simon Jessop) (joanne.frearson@thomsonreuters.com; +44 207 542 2773, Reuters Messaging:joanne.frearson.thomsonreuters.com@reuters.net)
