France tugs Eurostocks higher amid security fears

European blue chips rose yesterday after a volatile week as sentiment see-sawed between global security fears and hopes for sustainable economic growth, evidence of which should give equities a boost next week.

France's CAC was a clear winner, closing up 1.26 per cent at 3,366.12 points as firms such as European aerospace company EADS, Dexia bank, glass maker Saint Gobain and France Telecom lit up the blue panel.

But Britain's EMI Group lost 3.8 per cent after Time Warner picked a rival suitor - which has until Sunday to seal the deal - as preferred bidder for its music unit.

The FTSE Eurotop 300 index closed up 0.29 per cent at 916.96 points amid thin volumes, up from a session low of 911.96, but nearly three per cent down from last Friday's high of 943.58.

Truck bombs that hit British targets on Thursday in Istanbul following attacks on two synagogues last weekend persuaded investors to flee equity markets in favour of safe-haven government bonds.

Sentiment was further damaged yesterday after rockets were fired at Iraq's oil ministry and two Baghdad hotels used by foreign contractors and journalists.

"People were worried that if it continues, loss of consumer confidence could affect industries like travel and tourism," said Akber Khan at Deutsche Bank European equities.

"But if it carries on the market will become immune to it... there are still enough people out there who don't have enough exposure to the cyclical parts of the stock market."

The DJ Euro Stoxx 50 index rose 0.37 per cent to 2,578.24 points.

Strategists said the tempo should pick up next week with the focus back on stronger corporate earnings and a profits outlook from Finnish telecoms bellwether Nokia.

Investors will be looking for signs that Nokia could be reclaiming pricing power, which would boost the whole sector.

Economic data will also be important with the German Ifo business climate index due on Tuesday.

In the United States, consumer confidence, durable goods orders, upwards revisions to growth data, weekly jobless claims and the Chicago PMI are expected to boost confidence.

"The geopolitical element will not disappear, but markets will probably learn to live with it," said Fabrizio Pierallini, head of European equities at Lombard Odier Darier Hentsch.

"It will not disturb the overall global economic recovery. There are positive signs from the US employment market, the consumer side... Earnings and the economy are clearly improving."

Strategists think European equities, like the economy, are lagging the US and that those looking for value should start their search in one of the euro zone's three biggest economies, Germany, France or Italy.

But they warn that if the euro strengthens any further - it hit a record $1.1977 on Wednesday - then German and Italian growth, heavily reliant on exports, could stall.

Around Europe, the German Xetra Dax was up 0.12 per cent at 3,642.25 points, Britain's FTSE 100 was up 0.26 per cent at 4,319.0 and Zurich's SMI was up 0.1 per cent at 5,206.3.

French stocks led the field with European aerospace company EADS up four per cent after broker Morgan Stanley said the stock could trade up to €42 following its revaluation of the company's earnings power.

French-Belgian bank Dexia provided cheer after it posted nearly doubled third-quarter profits and stuck to forecasts of a strong rise in full-year earnings, sending its shares 1.5 per cent higher.

Saint Gobain picked up 2.4 per cent on news that a new chief executive had been appointed for the French company.

France Telecom rose 3.6 per cent after dealers said investment bank Goldman Sachs had upgraded its recommendation on the stock to "outperform" from "in line".

British-based banking group HSBC picked up 2.2 per cent, recovering from Thursday's losses after the bombing of its Istanbul office and supported by strong quarterly profits from US subsidiary Household International.

Dutch retailer Ahold gave up 2.3 per cent before its results due next week and after the company said it would not use a shareholders meeting on Wednesday to seek authorisation to issue more than 625 million shares.