European Shares Edge Higher

European shares edged up on Tuesday, extending the rises for a seventh session, though strategists were advising caution as weak euro zone economic data cast fresh doubts on the strength of the recovery.

At 0908 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,123.60 points, after rising 0.2 percent in the previous session to its highest close in one month.

The index is in the middle of a range defined by its 2011 high, hit in mid-February, and its low in March.

Novartis rose 0.7 percent after saying a late-stage study showed its drug Afinitor helped extend the time women with advanced breast cancer could live without their tumours worsening.

"Part of the reason for the rally last week was better than expected data out of the United States. The markets want to see whether that will be continued and whether the soft patch has come to an end," said Jeremy Batstone-Carr, strategist at Charles Stanley.

"With the U.S. debt ceiling issue moving toward the centre of the stage, and continued uncertainty, there is still plenty of reason for most investors to be strategically cautious."

Carrefour rose 4 percent as the French retailer prepared to list its Dia discount chain in Spain later on Tuesday.

"We have an equity value for Dia of 4.5 euros within our Carrefour divisional valuations, that is our Carrefour target price should adjust down to 25 euros although we expect Dia to more likely trade in the 3.5-4.0 euros range," RBS analysts says in a note.

However, mining shares were among those capping gains for the European benchmark, as a stronger dollar hurt metals prices.

The Stoxx Europe 600 Basic Resources Index fell 0.4 percent.

Across Europe, Britain's FTSE 100 rose 0.1 percent, Germany's DAX rose 0.1 percent and France's CAC40 fell 0.3 percent.

The Thomson Reuters Peripheral Eurozone Countries Index was down 0.8 percent.


Growth in the euro zone's dominant service sector slowed for a third straight month in June, and by more than an initial estimate, with sluggish new orders dimming the outlook, Purchasing Managers Index data showed on Tuesday.

"People were expecting the PMI to be weaker, with a slowing of the European economy," said Koen de Leus, economist at KBC Securities.

"The big question is whether it will go down in the second half of the year and also whether the U.S. ISM (due on Wednesday) will show whether the weakness was temporary due to the Japan earthquake. The (U.S.) payrolls data on Friday is also important."

European shares rose strongly last week, helped by Greece voting for austerity measures. Strategists said investors were now turning their attention to economic growth issues and the forthcoming corporate earnings season.

"Shares are rangebound and having tested the bottom of the range, and been supported by earnings and valuations, they may now test the higher end, and whether the macro picture, geopolitical picture, might be clearing somewhat. There is uncertainty over the near-term and long-term outlook for profit margins," Batstone-Carr said.

Among individual shares, CSM NV <CSMNc.AS>, the world's largest bakery products supplier, fell 10.1 percent after saying a higher than expected surge in raw material costs would lead to lower first-half earnings, even as it stepped up price hikes to compensate.