European shares buoyed by rise in retail stocks

Paris - A rise in retail shares pushed up European equities on Tuesday, while expectations of new economic stimulus measures from the European Central Bank (ECB) also propped up stock markets.

The STOXX Europe 600 Retail Index rose 1.9%, outperforming a 0.8% advance in the broader, pan-European STOXX 600 index and a similar rise in the pan-European FTSEurofirst 300 index.

German retailer Metro AG climbed 3% after it reported strong Christmas sales.

British supermarket operator Morrison also rose 5.6% as investors welcomed the departure of Morrison boss Dalton Philips, who had presided over weak Christmas trading figures.

The European energy sector underperformed as oil prices tumbled to their lowest levels in almost six years, but traders said this would help retailers as it theoretically would mean consumers would have more money to spend.

"The weaker oil price would put more money in consumers' pockets," said Andrea Williams, European equities fund manager at Royal London Asset Management.

Italian presidency

Italy's FTSE MIB equity index rose 0.7%, helped by the country's borrowing costs reaching new record lows on speculation that the ECB could unveil plans for government bond purchases at a meeting next week.

However, some traders remained cautious about the Italian market given the imminent departure of Italian President Giorgio Napolitano.

"Italy is still in a phase of a very fragile economic recovery and the new president will have to play a key role to sustain the current coalition," said Carlo Alberto de Casa, senior analyst at ActivTrades.

Greece's benchmark ATG equity index also rose 1.9% with the country's election on January 25 looming.

The leftist opposition Syriza party, which has said it will cancel austerity imposed under Greece's €240bn bailout and renegotiate some debts, is leading the polls, but some traders feel Greece will stay in the eurozone.

Rupert Welchman, European equities fund manager at Union Bancaire Privee, said that while he had reduced his holding of Greek shares, he did not want to be completely out of the Greek market in case it rallied after the Jan. 25 vote.

"During this long-running European crisis, we have been led to fear extreme outcomes time and again, and then the eventual outcome has been one of compromise," said Welchman.