European shares edged higher on Friday, with BP lending support after it received a payout for the Gulf of Mexico oil spill, but traders said gains would be limited ahead of the weekend on euro zone debt worries, according to Reuters. By 1156 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.2 percent at 1,141.10 points, but had pared earlier session gains as traders said investors were cautious ahead of the weekend in case any bad news broke about the euro zone peripheral countries. Market sentiment remained fragile due to ongoing debates about the possible solutions to Greek debt problems, with the main market worry that any restructuring could have contagion effects beyond Greece's borders. "We have had a few good days behind us in the stock market and it seems that people are squaring their books ahead of the weekend," Lex van Dam, hedge fund manager at Hampstead Capital, which has $500 million of assets under management, said. "With still a lot of possible headline risk out there, especially with regards to Greece and potential conflicts between the IMF, the Bundesbank and the various European governments." UK oil stocks gave the market some support, helping the FTSE 100 index gain 0.2 percent to outperform Germany's DAX and the French CAC index which were down 0.5 percent and 0.1 percent. BP rose 2.8 percent after MOEX, a unit of Japanese trading house Mitsui & Co, which had a 10 percent stake in the doomed Gulf of Mexico Macondo well paid the UK oil major $1.1 billion towards the cost of the oil spill. However, the negative sentiment ahead of the weekend, weighed on the heavyweight banking sector, which is sensitive to changes in the economic environment. The STOXX Europe 600 Banks index briefly reversed earlier session gains, but was trading flat. Meanwhile, the Thomson Reuters Peripheral Eurozone Countries Index fell 1 percent. Looking at individual stocks, blue chip food producer Associated British Foods gained 2.4 percent after Exane BNP Paribas upgraded it to "outperform" from "neutral" on valuation grounds. FUND MANAGERS POSITIVE However, fund managers said the euro zone debt situation was being priced into the market and looking at it from a long-term perspective cheaper valuations in Europe compared to other markets made equities look attractive. Equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 carrying a one-year forward price-to-earnings of about 10.8 against a 10-year average of 13.5. This compares to the S&P 500 which carried a one-year forward price-to-earnings of about 13.2 against a 10-year average of 15.4. "Our long-term view is Europe remains attractive in the context of global markets from a valuation point of view," Paras Anand, head of European Equities at F&C Asset Management, which has 7 billion euros of assets under management in European equities, said.
