FTSEurofirst 300 down 0.02 pct

Jan 17 2013, 04:21 IST
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SummaryEuropean shares ended flat on Wednesday.

European shares ended flat on Wednesday, bouncing off intraday lows as many investors used the dip to boost their exposure to equities, although mining shares fell along with metal prices on worries about China.

Rio Tinto lost 0.9 percent, Vedanta Resources dropped 1.4 percent and Xstrata shed 3.4 percent.

The FTSEurofirst 300 index of top European shares unofficially closed 0.02 percent lower at 1,159.95 points, after losing as much as 0.5 percent earlier in the session.

The benchmark index, which is already up 2.3 percent so far this year and has hit a near-two-month high earlier this month, has surged 8.8 percent since mid-November as fading fears of a break-up of the euro zone prompted investors to scoop up the region's equities.

The euro zone's blue chip Euro STOXX 50 index ended 0.04 percent higher at 2,702.54 points. The index has jumped 32 percent since early June, led by banking shares such as Credit Agricole, Mediobanca, which have more than doubled.

"Europe's catch-up rally is set to continue," said Roland Kaloyan, a strategist in global asset allocation at Societe Generale CIB.

"There is no reason to switch out now. Markets are flooded with liquidity, low volatility levels are supporting inflows, and valuations are still attractive."

Despite the recovery rally started in mid-2012, euro zone assets continue to trade at a significant discount relative to U.S. assets, Kaloyan said.

"In terms of price-to-book value, euro zone equities are trading at a 47 percent discount relative to U.S. equities... The Euro STOXX 50 should trade at around 3300 points, or about 25 percent higher than current levels, to normalise its relative valuation."

Around Europe, UK's FTSE 100 index dipped 0.2 percent on Wednesday, Germany's DAX index gained 0.2 percent, and France's CAC 40 added 0.3 percent.

Shares in European suppliers for Boeing's 787 Dreamliner passenger jets fell as Japan's two leading airlines grounded their fleets of 787s after one had to make an emergency landing, the latest in a series of incidents highlighting safety concerns over the Dreamliner.

Finmeccanica dropped 0.5 percent, Zodiac Aerospace lost 0.5 percent, MTU Aero Engines fell 0.7 percent and Thales slipped 0.6 percent.

Shares in Boeing were down 2.6 percent on Wall Street, while Airbus parent EADS, Boeing's arch rival, gained 0.9 percent.

The recent sharp rise in investor appetite for equities has also been reflected in the Euro STOXX 50 Volatility Index , or VSTOXX, Europe's widely used measure of stock market risk aversion.

The VSTOXX - which

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