European stocks end higher despite US jobs data

European shares closed higher yesterday as initial disappointment at softer-than-expected US jobs data was offset by optimism that interest rates will remain low for longer, helping profit growth remain on track.

Strong results from telecoms equipment maker Ericsson provided a boost for technology stocks, helping snap a three-day losing streak for pan-European bourses.

Having ridden the back of rally in techs, media stocks and telecoms in the first few weeks of the year, European indexes have stalled in recent sessions as investors demand more good news to extend gains.

"We're expecting markets to continue to move gently higher over the next two to three months, but it is getting harder and harder to make progress, basically because sentiment is at such high levels already," said Jason James, HSBC global strategist.

The FTSE Eurotop 300 index of pan-European blue chips closed up 0.6 per cent at 982.2 points, improving from a three-week low of 976.7 points hit on Thursday.

Turnover was a hefty €3.9 billion, and gainers outnumbered decliners by about five to three.

The narrower DJ Euro Stoxx 50 index ended 0.6 per cent higher at 2,833.6 points.

Traders initially marked down European shares after US non-farm payrolls rose 112,000 in January, below expectations of 150,000 but higher than December's upwardly revised 16,000.

The data sent the dollar tumbling, down a cent and a half against the euro, but stocks rebounded on expectations the Federal Reserve would be happy to keep rates on hold for a longer period.

"Although it is a bit disappointing - not to say surprising - that the US job market is not improving faster, it does mean the Fed will be more comfortable with rates steady until probably 2005. The one major concern here is the dollar," one London-based trader said.

Investors, worried about the damage to European exports and profits from the weak dollar, will be watching to see if a meeting of the Group of Seven finance ministers will act to halt the slide.

Currency strategists think that is unlikely before a US Presidential election in November and given the need to ensure that the US economic recovery does become an expansion.

"If they don't do anything about euro appreciation, then that is a concern for continental European stock markets," said Nigel Richardson, senior strategist at Axa Investment Managers.

On Wall Street, the Dow Jones industrial average was up 0.6 per cent at 10,557.6 points, while the tech-laden Nasdaq Composite jumped 1.4 per cent to 2,048.7 points by 1715 GMT.

Around Europe, London's FTSE 100 and Paris's CAC-40 both closed 0.4 per cent higher, while Zurich's SMI rose 0.9 per cent and Frankfurt's DAX closed 0.8 per cent firmer.

Sweden's Ericsson surged 11.8 per cent to a near two-year high after posting much better-than-expected fourth-quarter profits.

Techs rallied after Ericsson raised its guidance for 2004, and positive outlooks from British insurer Aviva, security firm Securitas and lock-maker Assa Abloy also helped push up the market.

Aviva rose 6.7 per cent after saying its 2003 operating profit was likely to beat forecasts following a strong performance from its life and general assurance operations in the second half.

Securitas, the world's largest security services company, ended 14.7 per cent firmer after its fourth-quarter profit beat forecasts, while Assa Abloy gained 6.6 per cent after its results.

Germany's Deutsche Bank outpaced its European peers for the second session running, gaining 4.7 per cent as investors cheered an upbeat earnings outlook and speculated about a merger or takeover.

Takeover talk also powered Dutch retail group Vendex up 15.3 per cent after the company said it had received approaches over a possible buyout bid worth €1.3 billion.

Oil stocks remained a weak spot, with Royal Dutch/Shell leading the way down with a drop of 2.7 per cent as a number of brokers cut their price targets on the stock following its results on Thursday.

Finnish electronics group Elcoteq fell 11 per cent after posting weaker-than-expected earnings and giving only vague guidance on 2004 sales and profits.