European shares have best day since March 2003

European shares rebounded strongly from recent woes yesterday, posting their biggest one-day points rise since March 2003, with miners jumping to end a prolonged drop as commodity prices steadied.

Indexes had lost all of their gains for the year in the past two weeks on fears of rising global interest rates and, despite the day's rise, stocks are still around eight per cent below the near five-year highs of May 11.

After settlement, the FTSEurofirst 300 index of leading shares closed 2.4 per cent higher at 1,302.02 points, having tumbled nearly three per cent in the previous session to hit a five-month low and dip into negative territory for the year.

The volume of shares traded was again above average.

The index, which added around €160 billion to its value, is now just back in the black for 2006, having received support from a rise on Wall Street in late trade. Most emerging market indexes also rose after heavy selling.

"We have got to very oversold levels, but to have a sustainable rally we have got to see markets stabilise for a few days," said Tristan Hanson, global strategist at Cazenove.

"What would be a concern is if markets bounce back too quickly."

Across Europe, Germany's DAX gained 2.4 per cent, Britain's FTSE 100 added 2.6 per cent and France's CAC rose 2.5 per cent.

Mining shares jumped as commodity prices rebounded after their recent sell-off from multi-year and record peaks, which had punished high-flying basic resources stocks and contributed to the global equity correction.

Anglo American and Rio Tinto gained nine and 7.5 per cent, while Antofagasta and Xstrata soared 10 per cent, with the DJ Stoxx basic resource sector up 7.5 per cent, having fallen 17 per cent from a record high on May 11.

Heavily weighted oil majors rose, with BP adding over four per cent as US crude oil climbed almost two per cent above $71 a barrel, partly on predictions for a busy hurricane season.

Stocks hardest hit by the correction such as Swedish engineering firm Atlas Copco recovered as much as 12 per cent, with Sweden's OMXS30 index jumping 5.5 per cent.

Technology stocks were also prominent in the rebound, with Dutch giant Philips rising 4.3 per cent after it agreed to buy British baby-feeding product maker Avent, while Finnish mobile handset maker Nokia also rose.

Shares in German stock exchange operator Deutsche Boerse rose after shareholders in Euronext rejected an attempt by some investors to pressure the pan-European exchange to look more favourably on a merger with its German rival.

Shares in Euronext gained 3.6 per cent as shareholders mulled merger proposals at its annual general meeting.

On the downside, UK retailer Marks and Spencer fell three per cent, having been down as much as nine per cent, after a jump in annual pretax profits only met analysts' expectations.

"The shares run the increasing danger of falling foul of great expectations, and after a year which has seen the share price rise some 65 per cent... the general view has cooled on what happens next and whether this progress is sustainable, even though on balance the shares are marginally favoured," said Richard Hunter at Hargreaves Lansdown Stockbrokers.