European shares end higher

Stable oil prices and more gains in pharmaceuticals giant AstraZeneca helped European shares end higher yesterday, but a dip in British American Tobacco stock capped the market's advance.

BAT shares fell 3.6 per cent, hit by a broker's downgrade, talk that future earnings might not meet analysts' expectations, and news from dealers that Morgan Stanley was placing five to six million shares in the world's second biggest cigarette maker.

But British sugar maker Tate & Lyle surged 7.6 per cent after the European Union announced smaller-than-expected cuts in the bloc's sugar subsidies. The landmark deal on sugar policy also lifted Denmark's Danisco by 4.7 per cent. The FTSEurofirst 300 index of pan-European blue chips ended 0.28 per cent higher at 1,248.20 points, its highest closing level since April 2002. The index finished the week 0.8 per cent higher than at the start, bringing to 20 per cent its overall gains since the beginning of this year.

Worries that higher interest rates could hurt economies, already showing signs of slower growth, have made many investors cautious about their moves in the final weeks of the year as they try to preserve the year's hefty gains. But some observers said such worries were exaggerated. "I disagree with people who think that the market got ahead of itself and that there will be a sell-off," said Stuart Fraser, investment director of European equities at Standard Life Investments.

"We're not particularly concerned about rises in interest rates in the medium term, It's a red herring to markets and people can get too carried away."

Trade was thin as US stock and Treasury markets were open for only a half day of trading yesterday, having been closed on Thursday for the Thanksgiving Day holiday.

Wall Street's gains also lent support. US shares rose as scenes of shoppers pouring into US stores for holiday sales lifted investors' hopes about consumer spending and retail profits.

Back in Europe, a stronger gold price helped mining stocks such as BHP Billiton, while AstraZeneca lent support to the pharmaceuticals sector. Its shares rose again on speculation that it could be a takeover target.

On the downside, Tesco shed 0.9 per cent after a disappointing sales update, while Aegis fell 2.7 per cent after advertising group WPP said it had no plans to bid for the UK media buyer.