European shares rose for the seventh straight session yesterday, reaching their highest close since early January, with mining and energy stocks in the lead while banks and mobile phone maker Nokia fell.

The FTSEurofirst 300 index of top European shares advanced 0.8 per cent to 888.18 points - its highest close since January 6.

Around Europe, Britain's FTSE 100 index rose 0.9 per cent, the German DAX added 1.3 per cent and the French CAC 40 gained 1.0 per cent while Zurich's SMI lagged with a gain of 0.2 per cent.

The European benchmark index has gained 37.5 per cent since it hit a lifetime low on March 9.

"I am very confident about European stocks," said Gary Clarke, head of European Equity at fund manager Schroders.

The price-to-earnings ratio (P/E) of European shares at 11-12 was "very attractive", for example compared with U.S. stocks trading at a P/E of about 15, he said in a note, adding that dividend yields in Europe were higher than in the United States.

Credit Suisse in a global equity strategy note upgraded equities to "overweight".

"We are halfway through the first 'V' of an upward sloping W-shaped recovery, with a likely peak in early Q4. Corporates have to rebuild inventories, which could send global industrial production up 10 per cent year-on-year," Credit Suisse said.

"Earnings revisions are now positive for the first time since August 2007," Credit Suisse said, adding that this was usually associated with stocks rising five per cent over three months.

Federal Reserve Chairman Ben Bernanke, testifying before the House Financial Services Committee, said yesterday the outlook for the US economy appeared to be improving.

Some bellwether US companies, notably Caterpillar, report-ed quarterly earnings above market expectations.

Caterpillar, however, later warned that the third quarter will be "very tough" on sales and it was conceivable the company would lose money during the period, sending US benchmark stock indexes into negative territory.

In Europe, mining added the most points to the FTSEurofirst 300 index. Copper prices rose more than two per cent to nine-month highs.

Anglo American gained 4.1 per cent, BHP Billiton was up 2.6 per cent and Rio Tinto added 2.3 per cent. The DJ Stoxx basic resources index, which includes miners, rose 2.2 per cent.

Crude oil touched a two-week high above $65 a barrel, lifting European energy stocks such as Total, up 1.7 per cent, ENI, up 1.2 per cent, and StatoilHydro, also up 1.2 per cent.

Healthcare was another sector showing strength, AstraZeneca and GlaxoSmithKline rising 1.7 per cent each.

Among food retailers Wm Morrison shot up 8.2 per cent after the company raised its full-year outlook . Sainsbury climbed 3.1 per cent, Carrefour added 1.7 per cent and Tesco rose 1.4 per cent.

Upmarket French luxury goods group Hermes rose four per cent after posting a 12 per cent rise in second-quarter sales, driven by demand for its handbags and perfumes.

Banks, which have outperformed the broader market with a rise of 122 per cent since March 9, were among yesterday's top losers, with CS Group down 3.6 per cent, BNP Paribas falling 1.7 per cent, UBS dropping 1.4 per cent and Barclays closing 1.2 per cent lower.

Nokia lost 2.5 per cent after Morgan Stanley downgraded the stock to "underweight" from "overweight", citing a "threat from rising competition in all segments".

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