Europe shares gain, but to end 2008 sharply lower

                                
 * FTSEurofirst 300 rises 1.7 percent
                                
 * Defensive stocks support, oils up
                                
 * Germany's DAX closes 2008 with 40 pct plunge
                                
 By Atul Prakash
                                
 LONDON, Dec 30 (Reuters) - European stocks rose on Tuesday
on the back of traditionally defensive telecommunication and
pharmaceutical shares, that were up at the tail end of the
year, but 2008 was on track for one of the biggest overall
falls ever seen.
                                
 The pan-European FTSEurofirst 300 index <.FTEU3> closed 1.7
percent higher at 824.47 points, but the index is set to post a
loss of about 46 percent in 2008.
                                
 Germany's benchmark DAX <.GDAXI> index gained 2.2 percent
to end 2008 with a 40 percent plunge on the year, the
second-deepest annual fall in its 20-year history. Trading on
the DAX will resume on Friday, Jan 2.
                                
 The DAX, which rose 22 percent in 2007, tumbled along with
stock markets around the world as turmoil in the financial
sector spread to the real economy, triggering a sharp downturn
and forcing governments to bailout a number of troubled
lenders.
                                
 Japan's Nikkei stock average fell 42 percent in 2008, the
biggest loss in its 58-year history, while in the U.S., the Dow
Jones industrial average <.DJI>, the Standard and Poor's 500
Index <.SPX> and the Nasdaq Composite Index <.IXIC> have fallen
35-42 percent so far this year.
                                
 "The year has been horrible. Going forward, the margins
will continue to come under pressure which is something
analysts haven't yet factored in," said Franz Wenzel,
strategist at AXA Investment Managers, in Paris.
                                
 "The first half of 2009 will be a rollercoaster area, but
we think that the negative momentum will peter out in 2009 and
give way for a positive outlook towards the end of next year."
                                
 The telecom sector added the most points to the
FTSEurofirst index on Tuesday, with BT Group <BT.L>, Vodafone
<VOD.L>, Cable and Wireless <CW.L> and Swisscom <SCMN.VX> up
0.7-4.5 percent.
                                
 Defensive drugmakers were also in demand. GlaxoSmithKline
<GSK.L> was up 2.4 percent, Novartis <NOVN.VX> added 1 percent
and Shire <SHP.L> gained 1.8 percent.
                                
 Around Europe, the FTSE 100 index <.FTSE> was 1.7 percent
higher and France's CAC 40 <.FCHI> rose 2.8 percent.
                                
 NEXT YEAR BETTER THAN 2008?
                                
 Tuesday was the last full-day session in 2008 for most of
the region's bourses. A number of European stock markets,
including London and Euronext's Paris, Brussels and Amsterdam
bourses, will be open for a half day on Dec. 31.
                                
 Analysts said that 2009 could be better than this year, but
the first half of the next year would be a difficult period.
                                
 "The sooner we can forget 2008 the better," said Howard
Wheeldon, senior strategist at BGC Partners. "I was negative
going into 2008, but if I'd have predicted that the stock
market would go down 46 percent this year I'm sure I'd have
been carted off to the mental asylum."
                                
 "We will end 2009 on the up," he added. "I'm quite
confident we will move into 2010 in a much better state, but
between now and then, my goodness we've got some nasty shocks."
                                
 Grim U.S. macroeconomic data continued to pour in, with
consumer confidence falling to a record low in December,
business activity in the Midwest shrinking this month and
prices of single-family homes in October plunging a record 18
percent.
                                
 "No one expected such a recession, such a crisis, and
markets are braced for a tough first half of 2009 with high
volatility," said Hans-Juergen Delp, investment strategist at
Commerzbank in Frankfurt.
                                
 Infineon <IFXGn.DE> was a standout gainer on Tuesday, with
a jump of more than 16 percent. Among energy stocks, BP <BP.L>,
Royal Dutch Shell <RDSa.L>, gas producer BG Group <BG.L> and
Tullow Oil <TLW.L> were up 1.1 and 3.7 percent.
                                
 Auto shares got support from the Bush administration's move
to expand its bailout of the U.S. auto sector, after it said it
was buying $5 billion in equity in auto and mortgage finance
company GMAC and raising a loan to General Motors <GM.N> by $1
billion.
                                
 BMW <BMWG.DE>, Daimler AG <DAIGn.DE>, Porsche <PSHG_p.DE>,
Volkswagen VZ <VOWG_p.DE>, Peugeot <PEUP.PA> and Renault
<RENA.PA> were up 1.5-5.9 percent.
 (Additional reporting by Rebekah Curtis in London and
Christoph Steitz in Frankfurt; Editing by Rupert Winchester)