Europe stocks shrug off ECB

European shares ended yesterday trade on a positive note as investors shrugged off hawkish comments from the European Central Bank and took their lead from buoyant earnings at Total and other companies.

Mining stocks rallied as base metals hit record highs, while telecoms group Telenor and chemicals producers ICI and BASF jumped after forecast-beating results.

Takeover talk spurred Intercontinental Hotels higher. The pan-European FTSEurofirst 300 index of leading stocks closed up 0.4 per cent at 1,385.3.

"Equity markets are fairly relaxed about a limited rate rise and appear more focused on the economic pick up," said Jeff Currington, European equities portfolio manager at Credit Suisse, in a note.

"Our view is that the bank will continue to keep a close watch on inflation before making another move, possibly in June."

The index earlier surrendered gains after the ECB kept interest rates on hold at 2.5 per cent but bank President Jean-Claude Trichet stepped up his anti-inflationary warnings and strongly signalled that investors were right to expect a June interest rate rise.

Mining stocks jumped, with Rio Tinto up 3.9 per cent, Antofagasta 3.1 per cent higher and BHP Billiton 1.9 per cent stronger, after copper and zinc prices reached record highs.

They helped to boost the DJ Stoxx European base resources index two per cent higher, while the chemicals index rose 1.2 per cent, driven by gains in ICI and BASF.

BASF boosted forecasts for the year after surging profits at its oil and gas unit helped to lift quarterly earnings well above analysts' expectations, sending its stock 2.4 per cent higher.

ICI gained 6.7 per cent after posting an eight per cent rise in underlying profit and unveiling plans to cut 2,300 jobs.

"Earnings are not really a problem for the time being, the reports are not too bad, but there is some question over outlooks," said Guillaume Duchesne, equity strategist at Fortis Private Banking.

Oil stocks gained, with Total up 1.7 per cent despite a dip in crude prices below $71 a barrel. The energy giant drew a favourable response from investors with a 16 per cent rise in first-quarter profit that slightly beat expectations.

Royal Dutch Shell gave up some of the day's gains to close 0.4 per cent higher, after it posted a bigger-than-expected rise in first-quarter profit but reported negative news on reserves.

Telenor was among the region's top gainers, up 9.7 per cent after posting a forecast-beating 55 per cent jump in first-quarter core profit and saying revenues would rise by nearly one-third this year.

"Obviously, around 85 per cent of all the figures coming out are better than expected. A lot of companies are talking about having cash to acquire other companies, so I guess the feeling right now is pretty bullish," said a Paris-based trader.

German industrial group MAN AG also ranked among standout gainers, rising 7.4 per cent after boosting quarterly operating profit by nearly 80 per cent.

Standout losers included Unilever, which fell 2.5 per cent as its results disappointed, and AstraZeneca, which slid 0.7 per cent after it dropped development of its Galida diabetes drug.

Spanish broadcaster Telecinco lost 3.3 per cent after warning that advertising could prove tough.

Intercontinental Hotels jumped 5.9 per cent, however, after a report in the Times newspaper that private equity group Permira may be mulling a bid for the company.