European stocks end higher as autos rise

European shares ended higher yesterday as Volkswagen and other car makers climbed after broker upgrades, but the gains were tempered by interest rate worries ahead of testimony by new US Federal Reserve Chairman Ben Bernanke this week.

"It's the Dow that's holding things back a bit with nervousness ahead of the speech by Bernanke," said a London-based trader. The pan-European FTSEurofirst index of 300 leading shares closed unofficially at 1,332.03 points, up 0.5 per cent. The index is up nearly four per cent this year, with gains driven by takeover speculation.

Germany's DAX and Paris's CAC 40 were buoyed by a rally in the auto sector after a string of positive broker research reports, both nearly one per cent.

The auto sector was also lifted by news that western European new car registrations rose 2.9 per cent to 1.21 million vehicles last month. The DJ Stoxx European auto index gained 3.4 per cent.

Volkswagen added a further five per cent, extending gains after news last Friday that it may cut up to 20,000 jobs in a sweeping restructuring.

"If VW succeeds to come to terms with labour unions on the cost-saving measures it would be a strong signal for the entire car sector," a Frankfurt-based trader said.

Among other German carmakers, DaimlerChrysler gained four per cent while Porsche and BMW rose more than three per cent. French carmaker Renault was also a top performer, surging 5.4 per cent.

London's FTSE 100 rose 0.5 per cent to 5,793.5 points, helped by continued speculation about consolidation in the banking sector.

Barclays rose 1.5 per cent after business weekly Barron's said its shares could rise 15 to 20 per cent over the next 12 to 18 months, as investors realised that fears about loan quality and profits were overblown.