European shares end up 1%, buoyed by banks, autos

European shares closed one per cent higher at five-week highs yesterday as robust earnings continued to buoy financial-sector stocks like ING, while a stronger dollar and DaimlerChrysler gave auto stocks a lift.

Sentiment on equity markets was further underpinned as crude oil fell to just above $57 a barrel, easing worries over the effect of high energy prices on companies' margins and raising hopes of better earnings to come.

But some UK retail firms were hit by a profit warning from building materials group Travis Perkins after a slump in consumer confidence and a slowdown in the housing market.

The FTSEurofirst 300 index of pan-European stocks was one per cent higher at 1,238.1 points, heading back towards a three-and-a-half-year high of 1,242.24 hit on October 5. The index has gained 1.4 per cent over the last week.

Germany's DAX - rich in auto and banking stocks - outperformed, rising 1.5 per cent.

Banking group HVB - the takeover target of Italy's Unicredito - surged 3.5 per cent, and Unicredito climbed 3.3 per cent after forecast-beating results. France's BNP Paribas climbed 2.1 per cent in anticipation of quarterly numbers later this month.

Dutch banking and insurance group ING, which beat forecasts in the previous session, extended its gains by three per cent.

"Whilst earnings revisions in the US are more or less flat, the recent spate of good news with regard to European Financials (eurozone in particular) has propelled earnings expectations sharply higher," said Franz Wenzel, a strategist at AXA Investment Managers.