European stock markets rose sharply yesterday, as above-consensus results from German giants Siemens and DaimlerChrysler pleased investors and after a surprise drop in US jobless claims.
A strong start on Wall Street after US weekly unemployment claims fell to their lowest level since February added further fuel to European blue chips' rise.
"Siemens and DaimlerChrysler's results were better than expected and on the macro side, the US labour market data is positive for a cyclical recovery," said Stephan Thomas, fund manager at German investment group Frankfurt Trust.
But French carmaker Peugeot reminded investors demand was still fragile, however, by cutting full-year forecasts, while STMicroelectronic's shares shed over three per cent after warning of shrinking profits.
By 1545 GMT, with only Frankfurt's DAX still officially trading, the FTSE Eurotop 300 index was up 1.7 per cent at 868 points, while the DJ Euro Stoxx 50 index gained 2.1 per cent to 2,480 points.
Britain's FTSE 100 index closed 1.5 per cent higher at a five-week high while France's CAC 40 ended 2.2 per cent stronger and the Swiss SMI rose 1.4 per cent.
In the US, the Dow Jones industrial average gained 0.6 per cent while the tech-rich Nasdaq Composite rose 0.9 per cent.
As investors sifted through a slew of earnings reports they worried that while companies such as Siemens and DaimlerChrysler may be beating consensus estimates, few firms are boasting an improvement in sales or profits compared with a year earlier.
"Consensus estimates have been met mostly through cost cutting, there is very little evidence of sales growth still or capital expenditure," said Paul Casson, an investment manager at SVM Asset Management, which controls about €1.5 billion.
Siemens climbed over four per cent after beating market expectations for third-quarter earnings, helped by a strong performance at its medical unit.
Core profits at the world's fifth-biggest carmaker DaimlerChrysler sank by nearly two-thirds in the second quarter, hit by losses at its US Chrysler arm, but the shares rose 3.8 per cent as the drop was not as bad as feared and the auto giant clung to its full-year profit guidance.
"It's interesting how at Siemens and at Daimler the picture has been the same. Weak sales and strong earnings," said Susan Levermann, fund manager at Germany's largest investment fund DWS.
DaimlerChrysler shares jumped as much as 5.5 per cent, its biggest one-day gain in nearly a month which added €1.7 billion to its market value.
"The share price reaction shows how cautious people were about this firm (DaimlerChrysler) ahead of the results. The earnings were good, especially in trucks, which probably reflects good discipline," Ms Levermann added.
Telecoms were also strong after Telefonica's dividend hike on Wednesday threw the sector's cash generation into sharp relief.
"Telecoms are highly prized for their cash-generating ability. KPN may be the next to announce a dividend," said Mr Casson.
Vodafone, the world's largest mobile phone group by revenue, closed 4.4 per cent up.
Also in London, shares in insurer Legal & General closed 5.7 per cent higher after a surprise dividend hike.
Royal Dutch/Shell Group, the world's second-largest oil firm, reported a consensus-beating 51 per cent rise in second-quarter profits but said it would not buy back more shares this year.
Although the rise in profits came in above market forecasts, Shell shares fell 0.1 per cent amid some disappointment on the buyback front.
AstraZeneca rose 2.4 per cent after raising its guidance for full-year earnings, despite reporting a 13 per cent fall in second-quarter earnings in the face of generic competition to three drugs.
But shares in Europe's second-biggest carmaker PSA Peugeot Citroen tumbled as much as 6.1 per cent after posting a slide in first-half profits yesterday and cutting key full-year forecasts due to the strong euro and slumping demand, particularly in France.