London - European equities bounced back on Monday in thin year-end trading, helped by firmer utilities and automobile shares, though tensions in the Korean peninsula and the lingering euro zone debt crisis capped gains.
At 0913 GMT, the FTSEurofirst 300 index of top European shares was up 0.3% at 1 129.85 points after falling 0.4% on Friday. The Euro STOXX 50 blue chip index rose 0.5% to 2 835.67 points.
The Euro STOXX 50 faced tough resistance at 2 837.89 - its 38.2% Fibonacci retracement of a major fall from a high in 2007 to a trough in 2009.
Automakers topped the gainers' list on hopes that a global economic recovery will boost demand for vehicles. The STOXX Europe 600 Automobiles & Parts index rose 1.3%, while Volkswagen AG was up 2%.
"For most of the traders and hedge funds, the year is over. There is not too much volume and you are not going to see much direction either way," said Koen De Leus, strategist at KBC Securities, in Brussels.
"Macroeconomic figures were lately on the upside. The market is overly bullish and overbought. If momentum in economic data continues to be good, then the market can stay around the current levels."
Utility shares were also in demand, with the European sector index rising 0.7% and National Grid gaining 1.6%.
But caution prevailed as despite threats of war by Pyongyang, South Korea launched live firing drills on a disputed island after an emergency U.N. Security Council meeting failed to agree on how to defuse the crisis.
Concerns about the euro zone debt crisis also persisted. The European Central Bank has expressed "serious concerns" that Ireland's bailout package could affect the institution's liquidity operations in the euro zone.
Energy shares advanced as crude oil prices rose as forecasts for freezing temperatures in Europe and the U.S. Northeast this week looked to boost heating fuel demand. The STOXX Europe 600 basic resources index was up 0.5%, while Total gained 0.9%.
Among individual movers, Abertis gained 3.2%. The Sunday Times reported without citing sources that British private equity group CVC is putting together a €12bn ($16bn) takeover bid for the Spanish infrastructure company.
Credit Agricole fell 1.1% after the French bank said fourth-quarter net profit will be hit by a charge of about €1.25bn as it reclassifies its 4.79% stake in Italy's Intesa SanPaolo as an asset for sale.
"Given that the probability of a recovery in the Intesa share price is low in the current context, the new management of Credit Agricole has undoubtedly preferred to register this latent loss now rather than in June 2011," CM-CIC Securities analyst Pierre Chedeville said.