European stocks start Q3 well after solid data

Better-than-expected data and strength in energy stocks after a rebound in crude prices boosted European share indexes by more than half a per cent yesterday, kicking off the third quarter on a positive note.

By 1532 GMT, the FTSEurofirst 300 index of pan-European blue chips was unofficially closed 0.7 per cent higher at 1,148.8 points.

The index surged more than five per cent in the second quarter, making equities the top performing investment among European assets, as positive revisions to earnings expectations kept valuations in check.

"On a relative basis, equities do offer value, and on an absolute basis, we believe that we are going to get an uplift in Q3 as people realise they have become too pessimistic (on the global economy)," said Stergios Saloustros, who works on the strategy team at F&C Asset Management, which has around E180 billion ($220 billion) under management.

The narrower DJ Euro Stoxx 50 index rose 0.7 per cent to 3,204.3 points.

Equity investors took heart from a series of data which showed surprising resilience in the global manufacturing sector.

Manufacturing continued to contract in both the eurozone and Britain in May, but the pace of contraction slowed as exporters benefited from a weaker euro.

In Japan, stronger consumer spending and improved business confidence boosted output, while US consumer confidence and manufacturing both came in better than expected. The data helped soothe concerns about a slowdown in global growth and supported arguments that interest rates in the United States were likely to continue rising, while reducing the chance of a rate cut in Europe.

"This is a positive signal for the global economy," said Mark Wall, an economist at Deutsche Bank in London.

"Clearly, oil prices are still quite high and they are still a risk."

US light crude climbed back towards $57.50 a barrel, up more than 1.5 per cent on the day, but off a peak of $60.95 early in the week.

Strength in oil prices fed through to energy stocks, with BP gaining 2.1 per cent ahead of its trading update next Tuesday. Rival Shell, which is benefiting from index-related buying following its decision to do away with its dual company structure with Royal Dutch, gained 1.8 per cent.

In New York, the blue-chip Dow Jones industrial average was 0.4 per cent higher at 10,313 points, while the Nasdaq Composite Index rose 0.2 per cent to 2,060 points.

London's FTSE 100 closed 0.9 per cent firmer, while Paris's CAC-40 ended up one per cent. In Zurich, the SMI added 0.4 per cent and Frankfurt's DAX closed 0.6 per cent higher.

DAX-component Altana weighed, sliding 15 per cent after Pfizer abandoned efforts to develop jointly the German company's drug for smoker's lung, Daxas, after a study showed the treatment failed to reach an important target.

British hotels and gaming company Hilton Group gained 2.2 per cent after saying it was selling 18 UK hotels to raise more than £400 million and would return a substantial part of the proceeds to shareholders.