* FTSEurofirst 300 up 1.6 pct, gains for second straight day
* U.S. economic data, bond buying supports shares
* Automobile and auto parts shares among top gainers
By Atul Prakash
LONDON, Dec 2 (Reuters) - European equities hit a two-week
closing high on Thursday on reports that the European Central
Bank had bought euro zone bonds and as data showed and
unexpected surge in U.S. home sales in October.
The FTSEurofirst 300 <> index of top European shares
finished 1.6 percent stronger at 1,106.18 points, the highest
close since Nov. 18. The session witnessed a choppy trade, with
the index moving in a broad range of 1,086.95-1,107.25.
The benchmark turned negative after ECB president
Jean-Claude Trichet disappointed investors by not announcing an
aggressive bond-buying programme, but the market got support
after traders said the ECB was buying Portuguese and Irish
sovereign bonds at a modestly higher rate than usual.
Bond traders said the buying was in small amounts, though
the aggregate was unclear. ECB bond buying has "been bigger than
the last couple of weeks, since yesterday. Yesterday and today
have definitely been bigger than usual," one trader said.
Shares in automobile and auto parts featured among the top
gainers after data showed U.S. auto sales rose a stronger than
expected 17 percent in November. Volkswagen <VOWG_p.DE>, Porsche
<PSHG_p.DE> and Renault <RENA.PA> rose 3.8 to 5.1 percent.
And analysts stayed positive on the outlook, with a majority
of companies beating forecasts in the third-quarter results
season.
"We are pretty bullish on the market for the next 12 months,
partly on the earnings surprise story ... I think that the fears
surrounding peripheral debt issues will abate as we go through
the course of the next year," said Graham Bishop, equity
strategist at RBS.
Investors heavily sold equities late last week on concerns
about the euro zone sovereign debt crisis. An 85 billion-euro
($110.7 billion) EU-IMF rescue of Ireland also failed to dispel
fears that Portugal or even Spain might also need help.
"Confidence has finally taken a turn for the good as
investors piled back into stocks, buying like they were going
out of fashion," said Angus Campbell, head of sales at Capital
Spreads.
"Once again, December is proving to be a bullish month of
the calendar year and we could easily see this rally continue as
investors top up their portfolios with attractive looking
equities ahead of the year end."
MACROECONOMIC DATA HELPS
Equities also got a boost from U.S. data showing jobless
benefits touched a fresh two-year low last week and an
unexpected rise in pending sales of previously-owned homes in
October.
The VDAX-NEW volatility index <.V1XI> showed the appetite
for risky assets rose, with the index falling 7 percent. The
lower the index, the higher the market's desire to take risk.
Sharp gains in share prices since Wednesday improved the
market's technical outlook. The Euro STOXX 50 <>, the
euro zone's blue-chip index, rose 2 percent to 2,781.39 points.
The index moved back above its 50-day moving average and the
50-percent Fibonacci retracement of a fall from a high in April
to a low in May -- generally a positive signal. But the index
faces strong resistance at 2,806, its 61.8 percent retracement.
Banks were also in demand, with the STOXX Europe 600 banking
index <.SX7P> rising 2.6 percent. Banco Santander <SAN.MC>, BBVA
<BBVA.MC> and Societe Generale <SOGN.PA> rose 4.2-5.1 percent.
Dutch mail and logistics firm TNT <TNT.AS> jumped 8 percent
after detailing the planned separation of its Express activities
from its mail activities and said it would keep a 29.9 percent
stake in the Express unit. []
