European shares end at new high

European shares yesterday ended at highs last seen in May 2002 as robust earnings and broker upgrades lifted banks, while retreating oil prices eased worries of squeezed profits at companies such as carmakers and airlines.

Pharmaceutical giant AstraZeneca also stood out as researchers said its experimental blood-thinner outperformed Plavix, the world's fourth-biggest selling drug with annual sales of more than $5 billion, in an early clinical study.

Shares in Sanofi-Aventis, which sells Plavix with Bristol-Myers Squibb, fell one per cent on the news.

The pan-European FTSEurofirst index of 300 blue chips added 0.3 per cent to end at 1,205.03 points, with market gains slightly capped by heavily-weighted oil majors as a new retreat in oil prices from recent record highs prompted some investors to lock in their profits on energy issues.

A US government report showing slower-than-expected business productivity and a rise in US wage costs also slightly dampened sentiment in the second half of the trading session.

Investors were also awaiting a speech by a key Federal Reserve official, Chicago Fed President Michael Moskow, at 1700 GMT, and the publication an hour later of the Fed's Beige Book on regional economic conditions.

Investors will seek clues from both events as to what the Fed is likely to do at its next interest rate meeting on September 20 amid speculation it might decide on pausing its monetary tightening while assessing the damage of the devastating Hurricane Katrina.

"We estimate the near-term loss in terms of output, employment and income in the affected area coupled with the surge in energy costs that impacts everyone will offset any future rebuilding by a factor of two to one," says David Rosenberg, economist at Merrill Lynch.

Back in Europe, London's oils-heavy FTSE 100 index ended 0.1 per cent higher. Paris's CAC 40 and Frankfurt's DAX added 0.3 per cent and 0.4 per cent, respectively. The Swiss Market Index was up one per cent in Zurich.

Credit Agricole, France's biggest retail bank, rallied six per cent after its second-quarter results beat analysts' forecasts and several brokers upgraded their ratings. Rating upgrades by Deutsche Bank also lifted Swiss banks UBS and Credit Suisse by 1.7 per cent and 2.4 per cent.

Still in the financial sector, Swiss Re shares rose 2.4 per cent after Credit Suisse and UBS both raised their recommendations on the stock.