European stock markets closed at their highest levels in almost two and a half years yesterday as falling oil prices boosted investor confidence, while Deutsche Telekom jumped after promising a bigger dividend.
The FTSEurofirst 300 index of pan-European blue chips closed one per cent higher at 1,031.6 points, its highest close since July 2002.
Turnover was solid at more than €2.4 billion and stocks to rise outnumbered those that fell by almost four to one.
The narrower DJ Euro Stoxx 50 index ended up 1.1 per cent at 2,903.9 points.
Dealers said a number of positive factors supported equities including undemanding valuations for European stocks, the re-election of incumbent US President George W. Bush, the seasonally strong period of the year for stocks, more certainty on global interest rates and a weakening in the high oil price.
"There's also quite a bit of cash around in the system and third-quarter earnings have been at least as good as most people would have expected," said one dealer at a European bank.
Crude oil prices were down three per cent yesterday, taking prices back towards $47 a barrel as supply concerns eased.
"On the basis of what we've seen over the last couple of weeks, you have to be cautiously optimistic," said Robin Weir, head of European research at Scottish Widows Investment Partnership.
The emphasis remained very much on individual stocks that can either increase their top-line figures or can demonstrate margin improvement, Mr Weir said.
"The headline valuation of the market is not that expensive, either compared to historic levels or compared with other markets around the world. We see Europe as very good value relative to the US in particular."
In New York, the blue-chip Dow Jones industrial average was 0.4 per cent firmer at 10,427.1 points, while the Nasdaq Composite Index rose 0.5 per cent to 2,045.6 points by 1716 GMT.
Around Europe, London's FTSE 100 closed 0.9 per cent higher, while Paris's CAC-40 ended up 1.2 per cent, both the highest for nearly two and a half years. In Zurich, the SMI rose 0.7 per cent and Frankfurt's DAX closed one per cent firmer.
Deutsche Telekom shares rose 4.4 per cent to €15.67 after it said it would pay out €2.6 billion to shareholders after a strong third quarter.
Other telecoms companies also firmed, with France Telecom closing up 3.3 per cent and BT Group up 3.1 per cent after it beat expectations with a four per cent rise in second quarter profits.
Spain's Telefonica missed the rally, closing down 0.1 per cent after cutting its 2004 core profit target.
In other sectors, Dutch insurer Aegon closed 3.5 per cent higher at €9.60 after its three per cent rise in third-quarter net profit topped expectations.
Airbus parent EADS rose 5.7 per cent to €24.90 after an Indian government panel gave approval for state-owned Indian Airlines to buy 43 airbus planes worth more than $2 billion.