European stocks rise but oil fears persist

European shares rose yesterday as high oil prices and waning fears over Hurricane Katrina boosted British oil heavyweight BP but uncertainty over the financial impact of the hurricane capped gains.

The FTSE 100 outperformed European bourses with a 0.7 per cent rise by 1132 GMT. The FTSEurofirst 300 index of leading European shares rose 0.35 per cent to 1,171.52 points, having snapped a five-day run of losses in the previous session.

"There had been big worries about oil prices ahead of the hurricane, so the fact that it's over and it doesn't look to be as bad as expected is seen as a relief by the London market," said Jim McCafferty, Head of Research at Seymour Pierce.

US crude futures hugged $68 a barrel, having hit a fresh record high of $70.80 on Monday after the hurricane ploughed through the Gulf of Mexico and into the United States.

"Oil clearly is a big focus still, particularly given that corporate results have wound down and the oil price has been carrying on going up," ING European Equities Strategist Gareth Evans said.

"We see the market performing in a weak manner."

BP rose one per cent after the oil major said its massive $1 billion Thunder Horse platform appeared to be stable following Hurricane Katrina's rampage through the US Gulf of Mexico.

Katrina shut at least half of the region's oil production, raising concerns supply to the world's top oil consumer could face a lengthy disruption.

Market watchers said it was still too soon to fully evaluate the impact of the hurricane on the US economy.

Insurers, feared to be among the most vulnerable, were firm though. Shares in the world's largest insurer Munich Re rose 0.6 per cent after the German firm said it would not change its earnings forecasts for 2005 because of the hurricane.

Insurers pressured the FTSEurofirst 300 index last week, helping send the benchmark down about three per cent largely due to soaring oil prices, pumped up by Katrina fears. The index has gained about 10 per cent this year.

The market will nonetheless focus on economic reports such as US consumer confidence and factory orders data due at 1400 GMT for fresh clues on the toll of surging oil prices on the economy.

A Reuters poll of analysts predicted consumer confidence to ease in August.

"Gasoline prices are up and that obviously has implications for consumer confidence in the US which is critical for the market," ING's Evans said.