Banks, miners help propel European stocks higher

European shares rose to end yesterday's session at their highest level since mid-May, buoyed by banking and resource stocks after US jobs data boosted hopes the Federal Reserve may keep interest rates on hold.

Sanofi-Aventis climbed after a judge blocked further sales of generic copies of blood-thinner Plavix, while Autostrade drove higher on hopes a planned takeover by Spain's Abertis will be cleared.

"We are positive on the market, I'm optimistic because of company valuations and backlogs," said Philipp Musil, fund manager at Constantia Privatbank.

"But most investors are nervous; we have a long weekend with markets closed in America. They have a huge amount of cash in their portfolios and mutual funds."

The FTSEurofirst 300 index of top European shares closed unofficially 0.4 per cent higher at 1,377.28 points, the highest in 3-1/2 months. The index is 2 per cent below a five-year peak of 1,407.52 set in early May.

The narrower DJ Stoxx was up 0.4 per cent at 3,535.3, while France's CAC 40 gained 0.4 per cent, Germany's DAX rose 0.3 percent and Britain's FTSE 100 added 0.7 per cent.

Wall Street stocks gained after August employment data showed a slowdown in wage inflation and jobs growth was nearly as expected. Other economic data showed weakness in the US housing sector.

Expectations that US interest rates may stay on hold helped buoy European banks, with Britain's Barclays adding 2.4 per cent and while UBS added 1.1 per cent and National Bank of Greece jumped 3.1 per cent.

"The US rate outlook is helping banks, but they have also been among the biggest laggards within financials in several weeks, so they are playing catch-up," said one trader.

Insurers also strengthened, with Legal & General up 3 per cent and Old Mutual gaining 2 per cent.

Resource stocks rallied, with Xstrata up 2.9 per cent after Deutsche Bank raised its price target, while BHP Billiton added 0.6 percent and Rio Tinto rose 1.1 per cent after workers voted to end a strike at their Escondida copper mine in Chile.

Global steel giant Arcelor Mittal added 2.9 per cent on news it would be included in France's benchmark index CAC 40 as of Sept. 18.

France's Sanofi-Aventis gained 0.9 per cent after a US judge blocked further sales of generic versions of its Plavix drug, but gains were capped as it warned cheap supplies of the blood-thinner already in the market would hit 2006 profits.

Alcatel was a notable faller, slipping 0.6 per cent after signing a preliminary agreement to buy Nortel's third-generation cell phone network unit for $320 million.

On the upside, Italy's Autostrade gained 3.6 per cent on hopes the Italian government will clear a planned cross-border takeover by Spain's Abertis after a minister spoke out against protectionism.

Among other major gainers, Ireland's C&C jumped 10 per cent on better turnover growth than expected and upbeat earnings forecasts.

Swedish healthcare company Capio rallied 37 per cent after it rejected a 15.6 billion crown cash offer by private equity firms Apax and Nordic Capital and analysts said it could attract higher rival bids.