By Adam Haigh Monday December 28 2009 European stock markets are heading into the last week of 2009 with share prices looking likely to record their biggest annual gains in a decade. Irish shares were among the best performers, a testament to how far they had fallen by the start of 2009. Allied Irish Banks surged 15pc and Bank of Ireland soared 19pc last week, the two biggest movers on the Stoxx 600. AIB shareholders approved its participation in the National Assets Management Agency (NAMA), which will buy loans from lenders at an average 30pc discount, reflecting a fall in land values over the past two years. The bank said it may need to rely on the Government after it transfers loans to the bad bank. The Government already has a 25pc stake in each of the two largest Irish banks. Analysts said the benchmark Dow Jones Stoxx 600 Index was heading for its largest annual increase in a decade, on mounting evidence that the global economy is recovering. Apart from the Irish banks, other big movers last week included Royal Dutch Shell Plc and Total SA, which led gains among oil producers as crude advanced after stockpiles of the commodity fell more than expected. The Stoxx 600 gained 2.3pc this past week to 251.9, extending its 27pc rally this year. A 59pc advance in the regional benchmark gauge from March was spurred by record-low interest rates in the US and Europe and by governments' commitments worldwide of about $12 trillion (€8.3trn) to revive credit markets and stimulate economic growth. Sales of existing homes in the US topped forecasts on December 22, the latest sign the world's largest economy was emerging from recession. "Markets still look to be reasonably good value and we expect profits are going to grow pretty quickly next year," said Kevin Gardiner, the London-based head of investment strategy at Barclays Wealth. Climb Earnings for companies in the Stoxx 600 are expected to climb 29pc next year, according to data compiled by Bloomberg. That compares with a forecast for a 7.4pc increase in 2009 profits. European equity strategists said earnings growth could push stocks 11pc higher in 2010 following this year's rally. Goldman Sachs Group Inc and Bank of America Corp, which underestimated the strength of this year's gains, predicted shares in the region could climb more than 20pc over the next 12 months. Morgan Stanley was the only brokerage among 16 surveyed by Bloomberg to estimate a retreat by year-end, saying the withdrawal of government stimulus would weigh on equities. Lower than normal trading volumes this week could continue next week, according to market analyst Cameron Peacock at IG Markets in Melbourne. All western European equity markets will be closed on January 1 and the UK market is closed today. The UK's FTSE 100 climbed 4pc this week, while France's CAC 40 rose 3.1pc. Germany's DAX gained 2.2pc as Infineon Technologies AG surged on a revised sales estimate. Shell, Europe's largest oil producer, gained 6.7pc and Total, the third-biggest, added 5.8pc. Debenhams lost 1.5pc, paring its rally this year to 234pc. UBS AG added the UK's second-largest department-store chain to its "least preferred" list of stocks. UBS said: "We see a higher risk to Christmas sales performance given the strong showing last year, a mild autumn and the recent cold snap."

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