European stocks hit five-year closing high on earnings

European stocks rose to their highest close since June 2001 yesterday, boosted by an upbeat outlook for corporate earnings, while DaimlerChrysler rallied four per cent after beating profit estimates.

Financial markets will take direction from an interest rate decision due from the Federal Reserve around 1815 GMT.

Stocks were also supported by surveys which showed that the euro zone economy was headed for a sprint finish to 2006 with Germany leading the way and France hard on its heels.

Among standout gainers, Electrolux jumped seven per cent after its third-quarter profit just topped expectations and the appliance maker said it would increase its payout to investors.

The pan-European FTSEurofirst 300 index ended 0.3 per cent higher at 1,454.7, but below an intraday high of 1,456.2. The index is up 14 per cent so far this year, lifted by a boom in acquisitions and strong results.

"Valuations generally are quite reasonable. Next year, I would not expect spectacular returns in equity markets. With the US as an exception, average returns of around eight per cent should be possible," said Lex Hoogduin, chief economist at fund management firm Robeco.

The Fed's policy-making Federal Open Market Committee is widely expected to leave rates unchanged at 5.25 per cent for a third consecutive meeting. But market participants are awaiting the Fed's statement for clues on where US rates are headed. US shares were mixed by the close of European trading hours.

Strategists said early results and a robust start to the US earnings season pointed to strong European profits in the third-quarter earnings parade.

A deluge of corporate earnings will dominate European stock trading today when France Telecom, AstraZeneca, GlaxSmithkline, Royal Dutch Shell and others report results.