* FTSEurofirst 300 index up 1.6 pct
* Volkswagen gains on Porsche bid hopes
* Investors hope Obama plan will help equities
By Joanne Frearson
LONDON, Jan 6 (Reuters) - European shares were driven higher
early on Tuesday by auto stocks, after Porsche <PSHG_p.DE>
increased its stake in Volkswage <VOWG.DE>, and by hopes that
stimulus plans by U.S. President-elect Barack Obama will boost
equities.
By 0955 GMT, the FTSEurofirst 300 <> index of top
European shares was up 1.6 percent at 887.21 points after
hitting a session high of 874.74, the highest level in nearly
two months.
The automobile sector led the risers. Volkswagen was up over
6 percent after Germany's Porsche raised its stake in the group
to more than 50 percent. []
Porsche gained 0.9 percent.
"It is a bear market rally and the market is holding on to
the gains of the first couple days of 2009," said Philippe
Gijsels, strategist at Fortis Bank.
"Investors are starting to realise we are not going to face
a severe recession like the great depression in the 1930s, but
policy makers are cutting rates to help ease the situation."
The euro fell broadly on strengthening market views that the
European Central Bank will shift to a more aggressive monetary
easing stance as euro zone inflation plunged more than expected
to a 26 month low in December.
"The market is also looking forward to Obama's plans which
we expect to get more details on over the coming weeks," Gijsels
said.
Obama has been working to secure Republican support for a
massive economic stimulus package, now put at as much as $775
billion over two years, to be implemented after he takes office
on Jan. 20. []
Meanwhile, senior German officials said the government's
second fiscal stimulus could reach 50 billion euros, nearly
double the amount expected just a week ago.
"The main things are the Obama plans as well as the German
fiscal stimulus package. Markets, rather than focusing on the
dire economic and earnings data, are looking forward to the hope
that these plans will work," said Bernard McAlinden, market
strategist at NCB Stockbrokers.
The pharmaceutical sector performed well. AstraZenenca
<AZN.L>, GlaxoSmithKline <GSK.L> and Sanofi-Aventis <SASY.PA>
were between 1.4-2.4 percent higher.
Energy stocks recovered from earlier falls as crude <CLc1>
rose 0.6 percent. BG Group <BG.L> and Total <TOTF.PA> up
respectively 0.4 percent and1.3 percent.
In the mining sector, Rio Tinto <RIO.L> and Xstrata <XTA.L>
were standout risers, up 5.4 percent and 3.8 percent
respectively, as copper <MCU3=LX> rose 5.8 percent.
Across Europe, the FTSE 100 <> index was up 1.9
percent, Germany's DAX <> was 1.4 percent higher and
France's CAC 40 <> gained 1.1 percent.
TOBACCO FALLS
The tobacco sector was the only sector in the red, with
British American Tobacco <BATS.L> down 0.7 percent.
Allianz <ALVG.DE> and Commerzbank <CBKG.DE> fell back 2.4
percent and 1 percent respectively amid renewed concerns that
Commerzbank's takeover of the insurer's Dresdner Bank unit may
cost more than previously anticipated.
A German newspaper, citing financial sources, reported that
Alliamz and Commerzbank are in talks with the German government
over state aid for Dresdner Bank. []
Later in the session investors will eye the U.S. Institute
for Supply Management's non-manufacturing index for December and
housing market data for November. The U.S. Federal Reserve will
also release the minutes from its December meeting.
"It is likely these sentiment indicators will be of
importance today. The markets has already been discounting a
severe downturn. It is now looking for signs things are not
getting worse and starting to bottom," said McAlinden.
Meanwhile, the euro zone Purchasing Managers' Index showed
services activity fell to a record low in December as new
business dried up, while inflation pressures faced by companies
eased considerably.
(Editing by David Cowell)
