Europe close: indices shrug off terror nerves to rise as Italy's banks in focus

At 16:22 GMT, the Euro Stoxx 50 was up 0.57% to 3276.58, with London's FTSE 100 ahead 0.19% to 7030.60. Germany's Dax rose 0.28% to 11,459.05 and France's CAC 40 firmed 0.54% to 4848.99.

"It's been another fairly quiet pre-Christmas trading day for European equity markets," said Michael Hewson, chief market analyst at CMC Markets UK.

The Dax had shrugged off the Berlin tragedy, which left 12 dead and 48 injured, to set a fresh year high. In Turkey last night, Russia's ambassador was shot dead by an off-duty policeman who appeared to be protesting Russia’s involvement in Aleppo, while in Zurich, three people were injured in a gun attack at a mosque.

"If investors are in any way fazed by the rise in geopolitical tension over the past 24 hours it's certainly not being reflected in stock market valuations," Hewson opined.

Milan's FTSE MIB was up 0.98% after Italy's government said it would seek parliamentary approval to borrow up to €20bn to support its banking sector and potentially rescue Banca Monte dei Paschi di Siena.

Reports have suggested that if Monte dei Paschi was unable to arrange a private-sector bailout, a state rescue might come as early as this week.

"Banking stocks have held up well today on reports that Italy's politicians are working on a rescue plan for the country’s beleaguered banking sector in the event that the private sector bailout plan for Monte dei Paschi is unsuccessful, which looks increasingly likely," Hewson said.

Meantime, at about 16:27 GMT, oil prices were firming with West Texas Intermediate crude gaining 1.09% to $52.69 a barrel. Gold was down 1.24% to $1128.5 an ounce, with silver flopping 2.11% to $15.75 an ounce.

"The oil and gas sector is amongst the better performing sectors today, holding up well on the back of another rise in crude-oil prices, with both Royal Dutch Shell and BP higher (in London)," said Hewson.

"Weakness in gold and silver prices is weighing on Randgold Resources and Fresnillo."

Finally, Mike van Dulken, head of research at Accendo Markets, commented that equities indices were trading flat on another sombre post-terror attack day with markets shrugging off renewed geopolitical risk and travel stocks not suffering their usual knee-jerk weakness.

"Major bourses remain close to highs, but may struggle to improve without a Monte dei Paschi recap/rescue in the bag," he said.

Investors also mulled over policy announcements from the Bank of Japan and the Reserve Bank of Australia, both of which stood pat on interest rates, as expected.

On the macroeconomic front, the European Central Bank said the eurozone current account surplus increased by €700m to €28.4bn in the 12 months to October. It was revised up to €27.7bn in September from the original estimate of €25.3bn.

Figures from Destatis showed producer prices in Germany rose more than expected last month. Producer prices were up 0.3% in November from October and 0.1% higher on the year. The year-on-year change was the first positive annual rate of change since June 2013.

Economists had been expecting a 0.1% increase on the month and a 0.2% drop on the year. Excluding energy prices, prices were up 0.3% on the month and 0.8% on the year. Energy prices rose 0.3% in November from the previous month but fell 1.7% from November last year.