European stocks end week at one-month highs

European shares closed at one-month highs yesterday with mobile phone giant Vodafone leading the way, but a slide on Wall Street kept stocks on a leash.

Vodafone, which reports annual results on Tuesday, added three per cent on robust earnings forecasts to help the telecoms sector streak away for the third consecutive day. BT and mobile phone operator O2 Plc, which put on 3.1 per cent, had posted strong figures yesterday.

"People have left behind defensive sectors and gone into telecoms, and that trend is probably likely to continue because of their insulation from cyclicals," said Nick Williams, a fund manager at Barings Asset Management.

By 5.40 p.m. the FTSEurofirst pan-European 300 index had unofficially closed up 0.17 per cent at 1,093.42 to rise for its fourth straight session.

Household appliance maker Electrolux was an early mover, up nearly five per cent after a private equity firm paid $1.125 billion for US rival Maytag, fuelling speculation the Swedish firm might also be a takeover target.

The market got a boost from JP Morgan, which estimated that European earnings had beaten expectations by close to 10 per cent, with about 80 per cent of the market capitalisation of Europe having reported so far.

The investment bank offered a note of caution, saying that sales had missed forecasts by two per cent.

Anglo American rallied 1.6 per cent as Morgan Stanley raised its rating on the diversified miner to "overweight" from "underweight", citing the arrival of the miner's new finance director in June and the stock's attractive valuation.

Banks were among the standout losers with the Royal Bank of Scotland losing 0.6 per cent after being downgraded to reduce by ABN AMRO, which said profitability at the UK bank had peaked.

BBVA was 0.7 per cent weaker as analysts said it was likely to win its battle to take over Italy's Banca Nazionale del Lavoro, although adding that its offer might have to be sweetened.

Around Europe, London's FTSE 100 index put on nine points Paris's CAC-40 added 0.25 per cent and Frankfurt's DAX was flat.

In New York, the Dow Jones Industrial average was 53 points weaker at 5.40 p.m. after a four-day rally and a private forecasting group released data showing a decline in the economy.

Strategists and fund managers expect Europe's upward curve to continue next week but doubt shares will break the psychological level of 1,100 on the FTSEurofirst in the coming month.

"Perhaps there is a bit more bounce left in cyclicals in the short term as growth figures in the US have not been too disappointing, but most people are going to use any bounce to take profits, so it might be short-lived," Mr Williams said.

"The market might rise one per cent next week barring any of the usual shocks in crude oil or from hedge funds."

The earnings season trundles on next week with results from French bank Societe General and Belgian bancassurer Fortis in the financial sector.

Marks and Spencer, Kingfisher and GUS post figures next week in a another sign of the state of British retailers after bad news from firms in recent weeks and retail sales on Thursday showing a pick up in April but a gloomy picture generally.