Earnings, oils, help spur European stock gains

European shares closed higher on Friday, buoyed by an upbeat batch of corporate earnings and stronger oil stocks after crude headed towards $59 a barrel, while jobs data illustrated the strength of the US economy.

Among major movers, Commerzbank and Adecco rallied after posting forecast-beating results, while British Airways fell after security scares and a unit sale led to a profit drop.

The pan-European FTSEurofirst 300 index ended up 0.4 per cent at 1,448.4, flat on the week and up about 13 per cent so far this year on robust earnings and a surge in takeovers.

"Earnings have been alright on the whole, certainly more positive surprises and not too many negative," said Dave Bradbury, head of equities at fund manager Canada Life.

"Trading conditions are really OK for most companies, consumers are still spending a bit of money. I do think the earnings growth for 2006 is likely to be rather more than 2007."

UBS strategists said third-quarter European company earnings were surprising on the upside, and consensus market forecasts for 2007 earnings remained stable at 8.5 per cent.

Indexes bounced after data showed the October US unemployment rate was the lowest in more than five years as 92,000 jobs were added and hiring figures for the previous two months were revised up, leading markets to slash bets on interest rate cuts.

"This is a rather encouraging note on the robustness of the US economy," said Societe Generale economist Frederic Pretet. "Now when you know that market players swing between inflation worries and growth worries, this report is clearly going to move the pendulum towards the inflation risks."

Around Europe, London's FTSE 100 index was flat, underperforming a 0.3 per cent gain in Frankfurt's DAX and a 0.5 per cent rise in Paris's CAC 40.

Oil stocks bolstered the market, with BP up 0.6 per cent and Royal Dutch Shell 1.2 per cent higher as crude rose after the U.S. warned that a militant group may have plans for imminent attacks on Nigeria's oil facilities.

Among companies reporting earnings, staffing firm Adecco jumped 4.7 per cent after its forecast-beating quarterly profit, while Commerzbank surged 4.3 per cent as it also topped forecasts and said it might be heading for its best-ever full-year result.

"For the first time this year, it is not about trading - interest income and commission income is strong," said Sigrid Baas, an analyst with ING.

British Airways fell 3.4 per cent after its second-quarter profits fell as expected following the UK airport security scare that forced it to cancel flights, and the sale of its loss-making regional unit BA Connect.

Smith & Nephew rose 3.6 per cent as investors warmed to the idea of a possible merger with US orthopaedics rival Biomet, after an initial sell-off on fears of a costly deal for the UK firm.