* FTSEurofirst 300 index closes 0.9 pct higher
* Banks among top gainers; Fed pledge on low rates supports
* Commodities track crude, metal prices higher
By Brian Gorman
LONDON, March 17 (Reuters) - European shares hit a 17-month
closing high on Wednesday, with banks, miners and energy stocks
gaining from the U.S. Federal Reserve's pledge to keep interest
rates near zero for an extended period.
The pan-European FTSEurofirst 300 <> index of top
shares rose 0.9 percent to 1,070.90 points, its highest close
since early October 2008.
The European benchmark is up more than 65 percent from its
lifetime low of March 9, 2009.
European stock markets will end 2010 higher, according to
Reuters polls. []
The VDAX-NEW volatility index <.V1XI>, a measure of investor
risk appetite, fell 2.2 percent. The lower the index, which is
based on sell and buy options on Frankfurt's top-30 stocks
<0#.GDAXI>, the higher the market's desire to take risk. The US
volatility index <.VIX> fell 6.4 percent.
"This rally, which we still consider to be a bear market
rally, has gone quite a bit further than we thought," said
Philippe Gijsels, head of research at BNP Paribas Fortis Global
Markets in Brussels.
"But as long as liquidity remains, there's no saying where
it might end. Investors with cash don't have much alternative to
equities, with interest rates so low."
"Governments and central banks have put massive fiscal and
monetary stimulus into the system. The big question for this
year is what happens when they withdraw it," he added.
Banks were among the biggest gainers, with Banco Santander
<SAN.MC>, Credit Suisse <CSGN.VX>, Societe Generale <SOGN.PA>
and Standard Chartered <STAN.L> up between 0.8 and 2.2 percent.
Heavyweight HSBC <HSBA.L> rose 1.4 percent, even as it
traded ex-dividend.
Italy's biggest bank UniCredit <CRDI.MI> rose 5.9 percent
after it beat forecasts for 2009 net profit and resumed paying
cash dividends. []
Irish banks enjoyed a St. Patrick's day rally, on hopes the
Dublin government may soon announce further bailout measures.
Allied Irish Banks <ALNK.I> and Bank of Ireland <BKIR.I> gained
6.9 and 6.3 percent, respectively.
In its comments on Tuesday, the Fed sounded more upbeat
about the job market and said inflation was likely to remain
subdued. []
The Fed's view on low inflation was backed up by data on
Wednesday showing that U.S. producer prices in February posted
their biggest fall in seven months as energy costs tumbled.
[]
Across Europe, Britain's FTSE 100 <> ended the day 0.4
percent higher; Germany's DAX <> and France's CAC 40
<> rose 0.9 and 0.5 percent respectively.
Wall Street was higher around the time European bourses were
closing. The Dow Jones <>, S&P 500 <.SPX> and Nasdaq
Composite <> were up between 0.4 and 0.6 percent. The Dow
hit a 17-month intraday high, an important technical indicator.
COMMODITIES RISE AS DOLLAR WEAKENS
Mining firms rose, underpinned by stronger metals prices as
the Fed's pledge on low rates pressured the dollar.
Anglo American <AAL.L>, BHP Billiton <BLT.L>, Fresnillo
<FRES.L>, Kazakhmys <KAZ.L>, Lonmin <LMI.L>, Rio Tinto <RIO.L>,
Vedanta <VED.L> and Xstrata <XTA.L> rose between 1.5 and 3.4
percent.
A rally in crude prices, which rose above $82 a barrel,
helped spur a rise in energy shares. OPEC ministers have agreed
to leave oil output targets unchanged, an OPEC delegate told
Reuters at a production meeting in Vienna. []
BP <BP.L>, Royal Dutch Shell <RDSa.AS> and Total <TOTF.PA>
added between 0.5 and 2.1 percent.
Among individual movers, Europe's biggest clothing retailer
Inditex <ITX.MC> gained 3.5 percent after it showed strong sales
growth in the first six weeks of the new year. []
UK transport company Arriva <ARI.L> rose 16.8 percent after
confirming that it has received an unsolicited approach from a
third party about a bid for the company after takeover rumours
for the firm circulated on Tuesday.
Siemens <SIEGn.DE> rose 3.2 percent, after source-based news
reports said it will cut at least 1,000 jobs in its SIS
information technology business ahead of a spinoff.
(Editing by Louise Heavens)
