The pan-European STOXX 600 index <.STOXX> inched up 0.1 percent, while the FTSE 100 <.FTSE> rose 0.5 percent after hitting a new all-time high of 7,284.81 points. France's CAC 40 <.FCHI> was flat and Germany's DAX <.GDAXI> added 0.2 percent.

Retail was heavily in focus. Morrisons (>> WM Morrison Supermarkets PLC) was among the top gainers in London after Christmas trading results exceeded expectations. Its shares ended up 3.6 percent in heavy volumes.

Britain's largest retailer, Tesco (>> Tesco PLC), rose 6 percent after market research showed it had the fastest sales growth of the country's four major players.

Metro (>> METRO AG) underperformed its UK peers with a flat close after the German discount retailer reported sluggish festive sales.

Mining and metal stocks <.SXPP> were the top performers, up 3.3 percent, extending their recent gains. The top risers were Anglo American (>> Anglo American plc), Rio Tinto (>> Rio Tinto plc) and BHP Billiton (>> BHP Billiton plc), which tracked the price of copper higher. [MET/L]

NOT FAST ENOUGH

The fast food delivery company Just Eat (>> Just Eat PLC) was the top faller on the STOXX, down 6.9 percent, after reporting full-year order growth of 42 percent but failing to beat its estimates.

"With a stock trading on such a lofty valuation, the market has grown to expect the company to exceed its estimates, so there's a little bit of disappointment," said Michael Stewart, analyst at Panmure Gordon Equities.

"It highlights the expectation that these companies can go on upgrading forever. We believe the investment case is intact, especially if the acquisition of Hungry House goes ahead."

The insurance <.SXIP> and banking <.SX7P> sectoral indexes fell 0.6 percent and 0.1 percent respectively, with Commerzbank (>> Commerzbank AG) down 0.7 percent on a UBS downgrade to "sell", and Deutsche Bank (>> Deutsche Bank AG) down 2.4 percent.

In Lisbon, Banco Commercial Portugues (>> B. COM. PORTUGUES) fell 11.3 percent to a fresh record low after the bank approved a heavily dilutive 1.3-billion-euros cash call to boost its capital position.

Spain's Banco Popular (>> Banco Popular Espanol SA) led the Madrid IBEX <.IBEX> lower, falling 2.7 percent.

(Editing by Catherine Evans)

By Helen Reid and Danilo Masoni