European shares stage rebound

European stocks rallied almost one per cent yesterday, with mining and building companies among the best performers as investors regained a measure of confidence after two weeks of turmoil.

Steelmakers were again in focus after Arcelor said it planned to merge with Russia's Severstal.

Arcelor, fighting a hostile takeover from global sector leader Mittal Steel, fell 3.9 per cent as dealers said Mittal may struggle to raise its bid, but other steel stocks such as ThyssenKrupp and Corus jumped.

By 1108 GMT, the FTSEurofirst 300 index of top shares was 0.8 per cent higher at 1,311.8 points, following gains made in Asian and US markets overnight.

The European benchmark closed up 1.3 per cent in the previous session, but is still six per cent below a near five-year high of 1,407.52 hit on May 11 after dropping on worries over inflation and rising global interest rates.

Some investors have responded to those concerns by putting more money in safe-haven cash and bonds, and buying stocks less affected by the economic cycle. Others, noting historically undemanding price to earnings comparisons, remain more confident. "I am not making the portfolio more defensive," said Stuart Fraser, investment director for European equities at Standard Life.

"Areas like construction materials and to an extent the steel industry, and many engineering companies and industrials and a lot of banks still look reasonably valued to me."

Miners were again strong after their recent sell-off, with Anglo American rising four per cent as rising oil prices sparked a rush for gold. Oil majors such as Total gained.

Roche was another positive influence, adding 1.5 per cent after its majority-owned partner Genetech Inc announced a submission to use colorectal cancer drug Avastin in breast cancer.

Early indications were for a mixed start on Wall Street as investors await the publication of key US inflation data.

The US core PCE price index, the Federal Reserve's favoured gauge of inflation, is due at 1230 GMT, with the final University of Michigan US consumer confidence figures for May out at 1345 GMT.

Around Europe, Britain's FTSE 100 added 0.9 per cent, Germany's DAX gained 0.6 percent, and France's CAC 40 rose 0.8 per cent.