European shares end at three-week high

European shares closed at a three-week high yesterday, buoyed by oil company stocks on the back of steadier crude prices, a rally in Belgacom and stable US economic figures.

Shares in Belgacom hit a record high, rising 3.6 per cent to €27.46 as brokers such as Goldman Sachs raised their ratings on the stock, citing a strong chance of a share buyback at the dominant Belgian telecoms group next year.

Belgacom had surprised analysts with a higher first-half profit and forecast an equally robust second half.

The FTSE Eurotop 300 index ended up 0.7 per cent at 981.49 points, with more than three shares rising for each one that fell. It was up 3 per cent for the week.

Volume was a paltry €1.6 billion, raising questions about the validity of the advance, though it was the pan-European benchmark's best close since August 3. It hit a 2004 low last week and has since risen five per cent to regain positive territory for the year.

"It seems to be a bit more settled than it was. We have seen some weak reports in the last few months, most notably US payrolls, but the data is not falling off a cliff. Relief in oil is also settling the market to a certain degree," said Mark Wall, an economist at Deutsche Bank.

On the downside, Europe's consumer electronics firm Dutch Philips eased after an executive at rival Sony reiterated the Japanese group's concerns about profitability.

And Britain's biggest dairy company, Dairy Crest, slumped 17 per cent to 318 pence after the country's largest supermarket chain, Tesco, said it would no longer be a customer.

The DJ Euro Stoxx 50 index ended 0.6 per cent higher at 2,704.53 points.

As bourses shut, in New York the Dow Jones industrial average was up 0.2 per cent at 10,193 points, while the Nasdaq Composite gained 0.5 per cent to 1,863 points.

Heavyweight oil groups underpinned the market as the price of US crude oil see-sawed in a narrow band after a deep five-day downward correction from last week's record highs of nearly $50 a barrel.

The commodity was trading around $42.80 a barrel. BP, ENI, Royal Dutch/Shell and Total were among the top gainers.

Meanwhile, GlaxoSmithKline rose one per cent to 1,142p after Europe's drug leader got off more lightly than expected in a high-profile legal clash with New York Attorney General Eliot Spitzer.

Investors had feared a lengthy and damaging battle after Mr Spitzer filed a suit accusing GSK of withholding negative information about its antidepressant Paxil, but GSK said it had settled the case for just $2.5 million.

Danish shipping and oil giant A.P. Moeller-Maersk pleased investors with a 46 per cent rise in first-half profit excluding special items, due to higher freight rates and volumes, and raised its 2004 earnings forecast.

Shares in Maersk rose 2.3 per cent to 43,700 Danish crowns. On the data front, US economic growth rose by a downwardly revised 2.8 per cent in the second quarter, in line with forecasts.

The final University of Michigan's consumer sentiment index for this month came in at 95.9, better than expected.

Investors look to next week's figures for further guidance on whether the economy's soft patch in the summer was just temporary, as the Federal Reserve has maintained.

"The market is now moving on to what happens with the US payrolls next Friday," Deutsche Bank's Wall said.

"If the payrolls is another weak report, then as much as we try to deny it, three weak payrolls in a row will look a bit like a trend, and then the growth bears would have a much stronger position," Mr Wall added.

US financial markets expect the Fed to raise US interest rates by another quarter percentage point at its meeting on September 21 as the central bank continues with a measured approach to lifting interest rates.