European shares ended sharply higher on Wednesday, lifted by upbeat results from industrial bellwethers Siemens and ArcelorMittal, while financials rose after major central banks expanded liquidity-boosting measures.
ArcelorMittal, the world's No. 1 steelmaker, reported record second-quarter results that easily exceeded expectations as it managed to raise prices and offset raw material costs despite economic gloom.
The DJ Stoxx basic material index rose 4.4 percent with ThyssenKrupp up 7.8 percent and Salzgitter up 3 percent.
Arcelor shares rose 8.2 percent and were the strongest positive weight in the pan-European FTSEurofirst 300 index, which ended up 1.6 percent at 1,180.75 points, after rising 0.3 percent in the previous session.
Markets also drew support from a move by U.S., European and Swiss central banks to extend liquidity offerings to stressed banks and securities firms to ease credit strains that have weighed on the global economy for nearly a year.
"The Fed has expanded its measures and signals very clearly that it will do everything to support the financial system," said Rainer Sartoris, economist at HSBC Trinkaus.
"This has a positive impact on the stock markets. Investors are now hoping again for more stability," he added.
Financial stocks gained with HSBC up 2.7 percent, Royal Bank of Scotland up 3.9 percent and BNP Paribas gaining 2.3 percent.
Christian Stocker, strategist at Munich-based UniCredit, said the move supported a trend that was set by U.S. banking stocks overnight after Merrill Lynch agreed to sell a massive debt portfolio at a discount, raising investor hopes it was putting its problems behind it.
Investors said Merrill's latest write-down may be a sign that banks are nearly through purging their balance sheets of bad mortgage debt.
"This trend may last for a couple of days, but in the longer term, I don't think that we've seen the worst here and that we will see further writedowns," Stocker said.
Lloyds TSB fell 4.7 percent after resilient half-year results by the UK bank were undermined by the threat of rising mortgage bad debts and lingering concern about its capital position.
Siemens was the second strongest positive weight on the pan-European index with its shares up 5.8 percent after the engineering group posted stronger-than-expected third-quarter results thanks to major contracts in its two largest sectors.
"Siemens reported excellent top-line growth," said Roland Pitz, analyst at Unicredit, who kept his buy rating.
Drugmakers were the most prominent losers.
Ireland's Elan slumped 32.3 percent as clinical trial results for its new Alzheimer's drug raised safety issues, while Belgium's UCB tumbled 8.3 percent after U.S. regulators gave it a "non-approvable" letter for a pain drug.
Bayer, which posted in-line second-quarter results, fell 1.9 percent as analysts voiced concerns over the outlook of its health care unit and the effects of generic competition.