Christmas rally enters sixth day in Europe

By Patrick Graham

LONDON (Reuters) - The year-end rally on Europe's major stock exchanges edged into its sixth day on Tuesday, just managing to ride out concerns over Greece and the pace of growth in China, in markets thinned out by the Christmas holiday season.

Greek shares fell almost 2 percent as investors looked nervously at a presidential election that may spark a snap election and eventually threaten Greece's commitment to its international bailout.

Shanghai shares also dropped the most in two weeks and a fall in prices of iron for construction - an indicator that property investment in China is weakening - spooked the Australian dollar.

But the tone overall has been steadier for the past few days, thanks largely to a stabilisation of oil prices - and a resulting easing of Russia's currency problems. A pre-Christmas rush of U.S. data due later may also underline the improvement in the world's biggest economy.

"We are likely to see some impressive U.S. data on Tuesday. This would be the first time since 2003 we have seen two consecutive quarters of GDP growth above 4.0 percent," analysts at BNP Paribas wrote in a note to clients.

Britain's FTSE 100 index rose 0.5 percent, Germany's DAX index was up 0.2 percent and France's CAC 40 was up 0.3 percent. U.S. stocks futures indicated that Wall Street was also set to open marginally higher.

"Most investors have closed their books for the year. There's not a lot of volume, and indexes are mostly in a neutral zone for now," said Jean-Louis Cussac, head of the Paris firm Perceval Finance.

Sterling dipped on the back of a shockingly large current account deficit and downward revisions of gross domestic product, while the dollar inched up to record another 8-1/2 month high against a basket of currencies.

Greek bond yields rose as the second round of parliamentary voting failed, as expected, to deliver a new president. Prime Minister Antonis Samaras' secured more votes than in the first round for his candidate, Stavros Dimas, but he was still 12 short of the support he needs in the final round next week to make Dimas president and avoid an election.

"There's a realisation that it's going to be tough to get the votes," said Michael Michaelides, a rates strategist at RBS.