European shares set 7 1/2-year highs on Tuesday, boosted by gains in Volkswagen after an encouraging report on auto sales.
Shares in Volkswagen rose 1.9 per cent after industry data showed new car registrations in Europe rose 7 per cent in February, with demand shifting from no-frills makes like Dacia towards mass-market brands like VW.
The pan-European FTSEurofirst 300 index was up 0.1 per cent at 1,596.94 points at 0844 GMT, after climbing to its highest level since late 2007 at 1,598.03 points.
The index has risen 16.5 per cent so far this year as bond purchases from the European Central Bank drove yields on government debt to record lows, leading investors to seek higher returns in equities.
Germany’s 10-year Bund yields yield less than 0.3 per cent compared with a 3 per cent yield for the FTSEurofirst.
“There is still strong appetite for stocks,” said Mike Reuter, a broker at Tradition. “Everyone is hoping for a pause but, with the Bund yield at 20 basis points, that money has to flow somewhere.”
UK retailer Sainsbury’s rose 0.3 per cent after a trading update. Analysts said a 1.9 per cent fall in underlying sales, while marking a fifth straight quarter of decline, was better than the market had feared.
“This is a solid number in an industry with -1.6 percent deflation and extra space still coming on,’’ analysts at Bernstein wrote in a note