European shares hit a new six-month high on Wednesday, with cyclical stocks extending a strong run as investors became more confident that economic growth would boost company earnings, and eclipse concerns about Greece.
At 1154 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.4 percent at 1,076.55 points, having earlier gone as high as 1,079.97, a level not seen since early August. The index is up more than 26 percent from the 2011 low it hit in September.
Recent data, such as U.S. jobs creation figures, has helped make investors more optimistic.
A lot of the economic data has been trending better, such as from the United States and China and parts of Europe. You want your portfolio to be well represented in more cyclical areas of the market, said London-based James Buckley, a fund manager at Baring Asset Management, which has 30 billion pounds ($48 billion) under management.
There's' been a sharper rotation than I expected out of defensives and that could continue in the short term.
Banks, many of which have significant exposure to peripheral euro zone countries and have taken a hit on their balance sheets following the long-running euro zone debt crisis, were among the gainers. The STOXX Europe 600 euro zone Banking Index .SX7E rose 1.5 percent.
Commerzbank CBKGn.DE rose 6.8 percent, breaking above the 200-day moving average and triggering some technical buying, after its Polish unit BRE Bank reported a better-than-expected 46 percent rise in fourth quarter earnings.
Greece's debt crisis continued to worry some investors, though most are optimistic it can avoid a chaotic default. Greek parties will try again on Wednesday to agree a reform deal in return for a new international rescue.
Greek banks .FTATBNK rose 2.9 percent, taking their gain in 2012 to 91 percent.
The markets are moving on the idea that no matter how long it takes, something must be settled and resolved satisfactorily (on Greece), said Mike Lenhoff, chief strategist at Brewin Dolphin Securities.
With European earnings season in full flow, the effect of the numbers and the accompanying outlook statements, has been mixed for equity markets.
Sanofi (SASY.PA) fell 1.7 percent after the French drugmaker said it was set to return to growth after 2012 -- a year in which sales will be hit by generic competition, as it met forecasts with a 13 percent rise in fourth-quarter profit.
The STOXX Europe 600 Healthcare Index .SXDP fell 0.3 percent, and is flat in 2012, making it one of the poorer performers. This compares with the auto sector .SXAP, up nearly 30 percent, and is part of a trend of cyclicals outperforming defensives.
Of the companies in the STOXX 600 .STOXX that have reported results in the current earnings season, 47 percent have missed forecasts, according to Thomson Reuters StarMine data. This compares with just 34 percent for the S&P 500 .SPX.
However, Buckley said that the markets are now looking through that and that better growth prospects mean there may not be too many downgrades going forward. He said European shares could, in 2012, regain the highs they reached in February 2011, about 10 percent above current levels.
The recent rally has pushed up valuations. The STOXX Europe 600 carries a forward P/E ratio of 10.1, according to Thomson Reuters Datastream, but strategists say this is still undemanding. It compares with 12.3 for the S&P 500.