* FTSEurofirst 300 ends 1.5 pct up; touches 28-month high
* Peripheral stocks surge, Spain's IBEX 35 gains 5.4 pct
* Risk appetite rises; volatility index hits 1-month low
By Atul Prakash
LONDON, Jan 12 (Reuters) - European shares hit a 28-month
high on Wednesday as sentiment improved following strong demand
for Portugal's debt, while a rally in metals prices boosted
resource-related equities.
Appetite for risky assets grew, with the VDAX-NEW volatility
index <.V1XI> down 6 percent to a one-month low. 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 for risk.
The FTSEurofirst 300 <> index of top European shares
finished 1.5 percent firmer at 1,163.94 points, the highest
close since September 2008.
Spanish stocks led the rally, with the country's benchmark
index IBEX 35 <> surging 5.4 percent. Banco Santander
<SAN.MC>, BBVA <BBVA.MC> and Bankinter <BKT.MC> gained 4.8 to 9.9
percent. The European banking index <.SX7P>, up 4.8 percent,
topped the sector gainers' list.
Investors were reassured after Portugal sold 1.249 billion
euros ($1.62 billion) in two bond maturities to strong demand,
lifting some pressure off the indebted country to seek a bailout
and easing fears over Spain's bond auction scheduled for
Thursday. [] []
Spain is also under pressure because of its high level of
debt.
"It's a bit of relief from the fear that was running really
high some days ago. There was talk that Portugal could be asking
for help very soon," said Klaus Wiener, chief economist at
Generali Investments in Cologne.
"Equity markets are rising because we have a fairly decent
global macroeconomic backdrop. The fast growing regions are
still powering ahead and we see growth accelerating in the U.S.
as well," he added.
"The auction showed that for the time being Portugal is
still able to access financial markets, if at a price," said ING
economist Paolo Pizzoli.
"With planned gross issuance for 2011 in the likes of 20
billion euros, the bulk of the tests have yet to come: other key
passages will likely have to be faced soon, as redemptions are
concentrated in April and June."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Euro zone struggles with debt: http://r.reuters.com/hyb65p
Portuguese debt spreads http://r.reuters.com/suf75r
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TECHNICAL OUTLOOK
The technical picture improved as the euro zone's blue chip
Euro STOXX 50 <> rose 3 percent to 2,879.11, breaking
above two key resistance levels -- the index's 50-day moving
average and the 38.2 percent Fibonacci retracement of its drop
from a 2007 high to a 2009 low -- sending a positive signal.
Resource-related shares were in demand as key base metals
prices surged on encouraging economic data and expectations of
stronger demand from top metals consumer China.
The STOXX Europe 600 Basic Materials index <.SXPP> jumped
2.1 percent, while Anglo American <AAL.L> and ENRC <ENRC.L>
gained 3.4 percent and 4.4 percent respectively.
EADS <EAD.PA> was up 2.1 percent after hitting a two-year
high as planemaker Airbus unveiled what it called the biggest
jet order in commercial aviation history with a $15.6 billion
deal to sell 180 planes to Indian budget carrier IndiGo.
Around Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC 40 <> rose 0.6 to 2.2 percent.
Portugal's PSI 20 <> was up 2.6 percent, while Italy's
FTSE MIB <.FTMIB> climbed 3.8 percent.
"Despite the quiet confidence that seems to have settled
among markets throughout today, the European recovery is in its
infancy yet, and it remains to be seen whether this positivity
is the start of a genuine turnaround in Europe," IG Index trader
Ben Critchley said.
(Additional reporting by Blaise Robinson; Editing by Erica
Billingham)
