* FTSEurofirst 300 up 0.2 pct in shortened session
* Euro STOXX 50 rises 0.1 pct
* Half-day on stock markets before New Year holiday
* FTSEurofirst on course for best annual gain since 2009
* FTSEurofirst up 16 pct since start of 2013
* DAX remains favoured European region for many
By Sudip Kar-Gupta
LONDON, Dec 31 European shares crept up on
Tuesday before the New Year break, with pan-European indexes set
for their biggest annual gains since 2009 and many investors
forecasting more progress next year.
Although the stock market rally still faces risks from
factors such as a possible spike in bond yields or a rise in the
oil price from civil unrest in the Middle East and Africa,
traders expect the gradual recovery in the world economy to
continue to support equities in 2014.
Trading volumes were extremely low as many European stock
markets including Germany, Italy and Switzerland had already
closed for 2013. London markets were set to close at 1230 GMT
and Madrid, Paris, Amsterdam, Brussels and Lisbon at 1300 GMT.
The pan-European FTSEurofirst 300 index edged up by
0.2 percent to 1,314.41 points in mid-session trading, while the
euro zone's blue-chip Euro STOXX 50 index rose 0.1
percent to 3,103.69 points.
Both those indexes were set for gains of about 16 percent
and 18 percent respectively for 2013, their best year since
2009, after signs of economic recovery coupled with a long run
of cheap central bank money fuelled a stock market revival.
The rally in Europe has lagged bigger gains in U.S. and
Japanese stock markets in 2013, and some traders and investors
felt ongoing divergences between European economies could lead
to more relative underperformance next year.
"While we remain bullish on equities overall, regional and
sector performance will vary significantly," said Threadneedle
Investments chief investment officer Mark Burgess.
Burgess favoured Japanese equities over European ones, as
did HED Capital head Richard Edwards, whose preferred European
equity region was Germany's DAX, which rose 26 percent
in 2013 to reach record highs.
"The prospects remain better for Germany than the rest,"
Overall, European shares have rallied as investor worries
over the euro zone's debt crisis abated, and the European
Central Bank and the U.S. Federal Reserve injected liquidity
into financial markets.
Earlier this month, the Fed announced it would slightly trim
its huge monetary stimulus programme, but investors have taken
heart from stronger U.S. economic data and a commitment from the
Fed to keep interest rates low for longer.
Yet while the DAX has hit record highs, other European
equity indexes remain a long way from peaks hit in 2007,
reflecting how Germany's economic recovery has been stronger
than that of its European neighbours.
France's CAC equity index still needs to rally about
44 percent to reach highs hit in 2007, before the start of the
global financial crisis, while Spain's IBEX must gain 62
percent and Italy's FTSE MIB 134 percent.
"Gains have been pretty solid in 2013, but compared with
Wall Street which is trading at record highs, Europe still has a
nice catch-up rally just to go back to 2007 levels," said a
Paris-based equity and exchange-traded fund (ETF) trader.