Healthy earnings help drive European stocks higher

A buoyant batch of earnings propelled European stocks higher yesterday, with gas group Linde and chipmaker Infineon rising after beating expectations, while ABN AMRO disappointed.

Takeover speculation swirled, with UK energy utility Centrica gaining after a newspaper report said Britain has ruled out blocking any takeover bid by Russia's Gazprom.

"The earnings progression in all regions has been good, but particularly in Europe," said Harry Talbot Rice, fund manager at Sarasin Investment Management Ltd. "The valuations across the region look reasonable, particularly compared to the States. Sentiment is going to continue to improve."

The pan-European FTSEurofirst 300 index closed up 0.3 per cent at 1,391.0 points, up nine per cent this year on robust earnings and corporate takeovers but shy of last week's near five-year high of 1,397.4.

Ranking as one of Europe's biggest gainers, Linde rose five per cent after beating analyst expectations with a 36 per cent profit rise, while Infineon rose 1.2 per cent after the firm swung to an operating profit, helping bolster technology stocks.

Drugmakers were in the spotlight after Switzerland's Roche posted a 15 per cent rise in sales, but the stock gave back some of its earlier gains to end up 0.3 per cent.

Schering shares were flat after the German drugmaker tipped healthy sales growth in 2006.

"Generally the numbers have been very good, pharma numbers have been fine and the industrial numbers OK. The disappointment has been in some of the bank numbers we've had," said Andrea Williams, head of European equities at Royal London Asset Management.

"Guidance from companies has been fairly robust but some of them are beginning to talk about pressure from the oil price."

Despite posting a 12 per cent rise in first-quarter net profit, Dutch bank ABN AMRO dropped 2.5 per cent after investors were disappointed by its weak US and global corporate income.

"The Q1 net was disappointing and the company says it expects full-year provisions to be somewhat higher than earlier announced," one trader said about ABN AMRO.

Carmakers rose, with Germany's DaimlerChrysler up 1.9 per cent and France's Peugeot gaining 3.5 per cent before sales figures due today.

"You've had very strong results out of Renault, and some guys are contemplating something good out of Peugeot," said a Paris-based trader.