Euro zone blue chips grind to fresh 18-month peaks
* EuroSTOXX 50 sets fresh 18-month highs
* Investors waiting to buy on dips
* Banks favoured for still attractive valuations
By Toni Vorobyova
LONDON, Jan 28 (Reuters) - Euro zone blue chips touched fresh 18-month peaks on Monday, with technical charts pointing to a continued slow grind higher backed by tentative signs of improvement in the global economy and corporate earnings.
The Euro STOXX 50 closed steady at 2,744.50 points after setting a fresh peak of 2,753.93 in the wake of stronger than expected U.S. durable goods orders showing firms in the world's biggest economy had stepped up spending.
The daily moves on the euro zone blue-chip index have averaged less than 10 points since Jan. 3, less than half of the usual size for 2012.
"It's not the top (of the market), but it's not going to accelerate, it's a slow market and you just have to be patient," said Valerie Gastaldy, analyst at Day By Day.
"As long as we are above (technical support at) 2,723 we can aim for 2,790. We are not that overbought because we've been very, very slow."
The FTSEurofirst 300 was down 0.15 percent at 1,172.99 points after touching a two-year intra-day peak of 1,176.19 plans.
The slow pace of the move higher, coupled with the 13 percent rally in EuroSTOXX 50 since mid-November, have made some investors reluctant to buy into the market at these levels, preferring instead to wait for any dip, as recommended, among others by Merrill Lynch Wealth Management.
That, in turn, means that any correction is unlikely to last for now unless the fundamental backdrop deteriorates.
"We have made good money over the last couple of weeks and months but we wouldn't add more to risk here in our portfolios," said Veronika Pechlaner, head of global equities at Ashburton.
"(But) equities, in the medium to long term are quite an attractive asset class, so for this year, bearing that in mind, we would follow a buy on dip strategy rather than sell aggressively from here."
Banks were the best performing sector in Europe, up 0.6 percent, as investors focused on areas of the market which still look relatively cheap despite the rally.
The sector, which was hard-hit first by the financial crisis and then by euro zone debt woes, is trading at just 0.80 times its book value, well below the 10-year average of 1.26 times, according to Thomson Reuters DataStream.
JP Morgan on Monday stuck by its 'overweight' stance on European banks despite shifting to an overall 'underweight' stance on cyclicals versus defensives.
JP Morgan pointed to Citigroup's U.S. Economic Surprise Indicator turning negative as well as the move by AAII Investor Sentiment Survey into the top 5 percent of observed readings. Equivalent moves in the past have normally been followed by lacklustre equity returns, it said.
Dividends remained another key, and relatively cheap, trade, with investors looking to alternatives to low yielding bonds.
Offshore driller Tansocean was the top rise in the pan-European FTSEurofirst 300, up 4.2 percent after activist investor Carl Icahn late on Friday pushed the company to declare a dividend of at least $4 per share.
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