Europe Markets

Banks, Commodities Drive Euro Stocks Higher


European shares ended sharply higher on Wednesday, driven by gains in banks after JPMorgan's results reassured worried investors, and by soaring commodity prices that lifted miners and oils.

The FTSEurofirst 300 index of top European shares ended 1.65 percent higher at 1,302.78 points, with the commodity and bank-heavy British FTSE 100 a strong out-performer.

Rio Tinto rose 6 percent, Royal Bank of Scotland jumped 7.6 percent and Total gained 2.4 percent, making them the top weighted gainers on the pan-European benchmark.

The FTSEurofirst 300 has risen 3.2 percent so far in April, putting it on track for its first monthly gain since October, but it has been an erratic journey through the month, with six up days and six down days.

Analysts said the signals were still mixed, at best.

"We remain cautious -- this is still a bear market rally," said Fortis bank strategist Philippe Gijsels in Brussels.

"The main drivers are Intel and JPMorgan, which are putting into some doubt the thesis that started some days ago with bad figures from GE and Alcoa, but we still think earnings will decline and guidance will come in lighter." A relatively upbeat outlook from Intel late on Tuesday and strong earnings from LG Electronics helped the technology sector, where Nokia rose 3.4 percent, and Infineon soared 10 percent.

JPMorgan said quarterly profit fell 50 percent but the third largest U.S. bank was able to skirt the massive losses that have crippled many rivals, and its shares were up 4.6 percent in New York.

Banks, the sector worst hit by credit market problems that brought a screeching halt to a stock bull run last year, were strong.

Credit Suisse rose 2.1 percent, Deutsche Bank climbed 3 percent and UBS ticked up 1 percent.

Barclays jumped 6.7 percent, HBOS 5 percent and Royal Bank of Scotland 7.6 percent, as a source close to the matter said British authorities were considering a scheme to swap mortgage collateral for government bonds.

The FTSE 100 index rose 2.4 percent, Germany's DAX index was up 1.8 percent, and France's CAC 40 gained 1.6 percent.

Commodities Afire; Results Mixed

Oil hit a record high of $114.95 a barrel before coming off, while the DJ Stoxx European basic resources index jumped 4.3 percent, making it the best performing of the Stoxx sectoral indexes, as copper prices jumped nearly 3 percent.

BHP Billiton and Lonmin gained 5.4 percent.

Rio posted a mixed first-quarter production report but the stock was helped by talk that BHP might raise its offer for the company.

One source familiar with the matter told Reuters that he was not aware that BHP was working on a revised offer and the companies declined to comment.

Heavyweight oil stocks gained -- BP rose 2.1 percent, Total 2.4 percent and Royal Dutch Shell 2.7 percent.

"There's lots of speculative money in the commodities space -- equities are volatile, credit markets are difficult and cash is not an option because of inflation," said Fortis' Gijsels.

"But we think commodities will correct for a number of months before resuming a long-term bull market." Strong euro zone inflation figures pushed the euro to fresh peaks against the dollar just shy of $1.60.

Corporate results were mixed, though deal talk provided support.

LVMH, the world's biggest luxury goods group, rose 4 percent after reporting a 12 percent rise in comparable first-quarter sales and said it expected higher 2008 earnings.

L'Oreal was among major losers, shedding 7.4 percent after posting first-quarter like-for-like sales below expectations late on Tuesday, blaming exceptionally tough trading in the United States.

TeliaSonera soared 11.6 percent after Le Figaro newspaper reported that France Telecom was studying a possible takeover of the group through a share swap.

France Telecom dropped 6 percent.

Both TeliaSonera and France Telecom declined to comment.

Investors will keep an eye on quarterly results from Wall Street firms Merrill Lynch on Thursday and Citigroup on Friday, that could shed light on the ongoing impact of the global credit crisis.