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European shares edge up; oil majors gain

Published 12/06/2010, 12:46 PM
Updated 12/06/2010, 12:48 PM

* FTSEurofirst 300 index ekes out 0.1 percent gain

* Energy firms boosted by strong crude prices

* Euro zone finance ministers meet; anti-crisis steps eyed

By Harpreet Bhal

LONDON, Dec 6 (Reuters) - Rallying oil majors lifted European shares on Monday as crude prices remained strong, just about offsetting nerves over the outcome of a euro zone meeting expected to outline further plans to contain the debt crisis.

The pan-European FTSEurofirst 300 index of top shares closed 0.1 percent higher at 1,105.41 points.

Energy firms rose as crude prices hovered just below a two-year high of $90 a barrel on expectations of higher demand for fuel due to freezing weather in Europe and parts of the United States. Heavyweight BP rose 3.4 percent, boosted by Pakistan's Oil and Gas Development Co. Ltd's plan to make a joint bid for BP's assets in Pakistan -- a deal which could form part of plans by the British oil major to raise cash to pay for the Gulf of Mexico spill.

Within the sector, BG Group, Total and Statoil were up 1 to 2.6 percent.

Some uncertainty prevailed ahead of the outcome of a euro zone finance ministers meeting, with the IMF expected to urge the bloc to enlarge the size of a 750 billion euro safety net and the European Central Bank (ECB) to step up its purchases of government bonds to stem the debt crisis.

Germany, however, rejected any such move and also dismissed a call by two veteran finance ministers for joint euro bonds to be guaranteed by the whole euro zone.

"The market is clearly looking for an enlargement of the rescue fund. They want to know what the plans are and if it is going to be sustainable," said Heino Ruland, strategist at Ruland Research in Frankfurt.

"If that is not on the table, people will continue speculating against the euro."

Banks were on the back foot, with Barclays, Societe Generale and Deutsche Bank down 1.4 to 1.9 percent, while Spanish banks Banco Santander and BBVA lost 2.3 and 2.9 percent respectively.

DOVISH FED

The market initially received a boost after Fed Chairman Ben Bernanke said on Sunday the Fed could end up buying more than the $600 billion in U.S. government bonds it had committed to purchase, if the economy failed to respond or unemployment stayed too high.

"With Fed Chairman Ben Bernanke signalling that further stimulus cannot be ruled out yesterday - investors still have a buy-weakness mentality, suggesting that a "Santa rally" could be on the cards over the next few weeks," said David Jones, chief market strategist at IG Markets.

Among individual movers, Xstrata rose 3.4 percent on newspaper reports Glencore, which holds a stake of nearly 35 percent in the company, is looking to raise 6.3 billion pound ($9.94 billion) for a London Stock Exchange debut as early as next year.

On the downside, Michelin fell 3 percent as broker UBS downgraded its recommendation on the French tyremaker to "sell" from "neutral", citing pressure from natural rubber prices. (Editing by David Cowell)

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