European stocks boosted by techs

European shares closed higher yesterday after rising to a three-and-a-half month high, as interest rate worries eased and oil prices fell to a 10-week low, while technology stocks such as Ericsson gained.

L'Oreal closed up 2.3 per cent at a one-month high on the eve of its first-half earnings report, which is expected to show an 11 per cent increase in operating profit to 1.24 billion euros

Utility shares dropped as Germany's energy regulator asked subsidiaries of E.ON and RWE to cut proposed power and gas transmission fees by up to 16 per cent.

Norway's Pan Fish, the world's largest fish farming firm, was among the leading gainers and the second most heavily traded stock, with a volume of 189 million shares, almost six times its daily average over the past 30 sessions. The company reported a sharp rise in second-quarter pretax profit and said it expected strong results for the second half.

The FTSEurofirst 300 index of leading European shares officially closed 0.6 per cent higher at 1,375.52 points, after hitting its highest intraday level since May 12, just two per cent away from a five-year peak of 1,407.52 set on May 11.

The release of minutes of the Federal Reserve's August 8 meeting - when the Fed halted a two-year string of interest rate increases - calmed European markets. The Fed has been counting on a slowdown in economic growth to keep inflation in check.

The minutes showed that policy-makers were concerned about rising prices but patient on the need for more rate hikes as they awaited further economic data.

"The minutes of the FOMC meeting from August 8 were less hawkish than feared, prompting a positive reaction in both bonds and equity markets," said Francesco Garzarelli, analyst at Goldman Sachs.

But strategists expected investors to remain on edge amid concerns that the Fed might already have gone one step too far and that current rate levels could lead to a sharper-than-expected slowdown in the world's biggest economy.

Oil prices fell to their lowest since June 13, as US crude oil stocks rose 2.4 million barrels last week to 332.8 million barrels, confounding analysts' expectations for a 1.5 million barrel decline.

Around Europe, London's FTSE 100 index closed 0.7 per cent higher, Paris's CAC 40 closed 0.4 per cent up, Frankfurt's DAX closed 0.4 per cent firmer, and the Swiss Market Index closed up 0.2 per cent.

European technology stocks rose for a third day in a row, with Alcatel up almost four per cent after a US lawyer for a class-action lawsuit against Lucent said he was seeking to stop shareholders from voting on a proposed merger with the French firm.

Ericsson closed 3.4 per cent higher after Standard & Poor's changed its outlook on the firm's debt to positive from stable, citing the Swedish company's second-quarter results and a review of the group's medium-term trading prospects. News of contract wins in Ireland and Angola added to positive sentiment. Deutsche Post closed 1.2 per cent higher after saying it had no plans to surrender control of retail bank Postbank, quashing rumours that the bank could be sold soon. Postbank shed 2.2 per cent.

"We currently do not believe that Deutsche Post is willing to sell its cash cow in the short to medium term because it would probably harm the rating," said Johannes Thormann, analyst at German bank WestLB said.