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Shares extend their rally in thin pre-holiday trade

TOKYO/HONG KONG--Shares advanced in Asia but were trading lower early Monday in Europe in thin pre-holiday trading, after Japan's Nikkei 225 index ended 2013 at its highest level in more than six years.

The Japanese benchmark gained 0.7 percent to 16,291.31 on Monday, its highest close since late 2007. Prime Minister Shinzo Abe took time out from his winter vacation to celebrate the year-end trading close.

“Thanks to our efforts, the economy went from minus to positive,” Abe said. With winter bonuses up by several hundred dollars on average, he said, “You have to use that money, keep it moving.”

In early European trading, Germany's DAX index edged 0.01 percent lower to 9,589.17 while Britain's FTSE 100 also was 0.03 percent lower, at 6,747.20. France's CAC gained 0.2 percent to 4,284.32.

This was a banner year for many markets, with the DAX up 26 percent, the CAC index up 18.4 percent and the FTSE 100 gaining 14 percent. But none matched the Nikkei 225, which soared 56.7 percent in 2013 on renewed confidence in the economy after years of feeble growth.

Easy liquidity from government spending and monetary policies aimed at fueling inflation boosted shares, though the potential for continued strong gains remains uncertain.

For now, Abe can point to the share rally as evidence his “Abenomics” policies are yielding results.

“This has been a boom year — it's been a long time since we've seen such a robust performance,” said Hikaru Sato, a senior technical analyst at Daiwa Securities of the Tokyo stock market's rise.

“The Nikkei still looks to round off what has been an astonishing year ... its best year since 1972,” Chris Weston of IG Markets said in a commentary, noting that the gain in that year was 92 percent and unlikely to ever be beaten.

“For those looking for volatility, the Nikkei will remain a major focus for traders in 2014,” he said.

Japanese shares will get support in coming months from newly established individual savings accounts, called NISA, that are expected to draw a significant share of household savings into the market.

Sydney added 0.61 percent, or 32.7 points, to 5,356.8 and Seoul closed 0.45 percent higher, adding 9.06 points to 2,011.34.

Manila and Bangkok were closed for public holidays.

Shanghai slipped 0.18 percent, or 3.72 points, to 2,097.53. Hong Kong ended flat, edging up 1.63 points to 23,244.87.

In Shanghai shares gave up earlier gains to end down Monday as dealers remain wary about a possible slowdown in the Chinese economy. There are also worries about growing debt in the country that some analysts fear could hammer the financial system.

Traders this week will be watching the release of manufacturing data from around the world, which will provide the latest snapshot of the state of the global economy.

Global markets have seen a mixed year, with most enjoying strong buying in the first half thanks to the U.S. Federal Reserve's stimulus programme, which provided cheap cash for investment in mostly emerging economies.

However traders began pulling out of emerging markets from May after Fed chief Ben Bernanke said the bank could begin to wind down its bond-buying operations as the U.S. economy showed signs of strengthening.

Gold fetched US$1,203.35 at 0810 GMT compared with US$1,211.56 late Friday.

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