Europe stocks at 16-month high
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LONDON, England (Reuters) -- European shares defied a feisty euro and an unfolding scandal at Italian food group Parmalat to close at their best level in 16 months as investors bet the economy and profits will improve next year.
"People are thinking about next year and confidence is pretty high," said John Hatherly, head of global analysis at M&G Asset Management.
"The mood has been set and it's positive. For that to be broken down, you need hard evidence that expectations won't be met," Hatherly said.
Fiat shares lagged, however, after a union source said the Italian group's car division plans to put about 2,700 workers on a one-week lay-off in January.
But Lufthansa rose after the German airline's chief executive told a newspaper he expected a return to profitability in 2004.
UK retailers such as Matalan and Next rose on hopes that sales during the key Christmas period have held up.
Share dealings were light at around half their usual level as many investors were still on year-end holidays, with little fresh news to spur major moves.
The FTSE Eurotop 300 index closed 0.3 percent higher at 953.15 points, up for the fifth straight session and notching its best close since 956.55 points on August 30, 2002.
The pan-European benchmark is on course to end the year up about 11 percent and snap a three-year losing streak, although is still only at roughly half the level of its record high of September 2000.
The DJ Euro Stoxx 50 index of euro zone blue chips rose 0.8 percent to 2,744.2 points.
Investors were betting that U.S. economic numbers due later in the week, such as consumer confidence and the Chicago purchasing management index, would show the American economy continues to recover well, Hatherly said.
Parmalat's stock was suspended until further notice after the group was declared insolvent over the weekend and its founder Calisto Tanzi was arrested and accused by prosecutors of misappropriating 800 million euros ($999.4 million) from his family-controlled food group.
The stock is already nearly worthless as a criminal probe into billions of missing euros continues to unfold due to suspected fraud in the scandal that broke in mid-December, though markets remained steady.
"Investors are being calm about the latest corporate scandals, such as at Parmalat, because the relative scale compared to Enron is less dramatic. The shock factor is also diminishing as the roll call of perpetrators gets longer and longer," said Bear Stearns strategist Steve Barrow, referring to the massive accounting fraud that engulfed U.S. energy trading group Enron.
Shares in Italy's Centrale del Latte di Torino were suspended limit up after the stock soared seven percent on hopes the group may snap up some of Parmalat's assets.
Meanwhile, Dutch food group Ahold, after its own accounting scandal earlier this year, rose two percent to six euros after closing a 300 million euro and $1.45 billion back-up credit facility to bolster its finances.
Euro headache
The euro rose to a record high above $1.25 due to security worries and as concerns over the U.S. current account deficit kept the greenback under pressure.
A strong euro makes exports from the euro zone less competitive in the U.S. market.
The Financial Times said a senior unnamed official at the European Central Bank was becoming increasingly uneasy about the euro's rapid rise. But the German government said it was not worried about the current strength of the euro.
Germany is home to one of the year's best performing bourses with the DAX up 38 percent so far despite being the stock market for shares in many of Europe's top exporting firms.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
