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Miners beat expectations to support European shares

Alistair Smout
Wednesday, 29 Jan 2014 | 7:02 AM ET

* FTSEurofirst 300 up 0.1 pct

* Miners rise after Anglo, Anto post record copper output

* Early gains pared as Turkish rate hike relief limited

* Fed bond-buying reduction could spook markets again

LONDON, Jan 29 (Reuters) - European shares rose on Wednesday, buoyed by positive updates from miners and an increased appetite for riskier stocks after Turkey acted to defend its currency, though relief in emerging markets looked to be short-lived.

Miners Anglo American and Antofagasta led the pan-European FTSEurofirst higher, rising around 6 percent at one point, after both posted record copper production, on a quarterly and a yearly basis respectively.

"Commodities are very world growth geared, and as there seems to have been a turnaround in world growth, that should benefit commodities such as copper," James Butterfill, global equity strategist at Coutts, said.

"Given recent weakness in emerging markets, people might start to question the strength of the (world growth) recovery, but I think that we should look through that, and see that the recovery is still intact."

Sectors sensitive to global growth trends drove the market higher after Turkey's central bank jacked up its interest rates in a much sharper move than forecast, and stocks with large emerging market exposure, such as Lafarge, outperformed.

The pan-European FTSEurofirst was up 0.1 percent at 1,299.80 at 1124 GMT, having fallen 4.2 percent in three sessions into the beginning of this week as emerging market currencies weakened.

However, the index pared much stronger earlier gains, with strength in the Turkish lira largely reversing.

Some analysts said that if the U.S. Federal Reserve scales its stimulus package back further as expected at its policy meeting later on Wednesday, it could reignite concerns about emerging markets.

"(The Turkish rate hike) is a short-term fix. If the Fed takes another 10 billion out of QE today ... I think (EM currencies) will probably end up weakening further," Nick Xanders, who heads up European equity strategy at BTIG, said.

Problems in emerging market economies with large current account deficits had been hidden by the U.S. stimulus programme, which unleashed cheap money flows into emerging markets, he said.

"For the last three years, investors have thought that they've put the glass slipper on Cinderella, but actually, when the QE is taken away, you realise it's the ugly stepsister."

The autos and parts sector, which is usually sensitive to optimism over the economy, gave up good early gains after Fiat cut its profit guidance after a cooling of its large Latin American market eroded earnings.

Shares in the Italian carmaker fell 5.8 percent.

Today's European research round-up

Asset returns in 2013: