European stocks ended higher yesterday as strong US home sales and durable goods data helped soothe worries over the health of the country's economy and kept the market's week-long winning run alive.

But lingering concerns over the credit markets and the fallout from the US subprime market crisis limited the gains.

Oil and gas company shares rose along with crude oil prices, with Total up 1.4 percent, ENI up 1.6 per cent and BP up 1.1 per cent.

The pan-European FTSEurofirst 300 index closed 0.33 per cent higher, at 1,514.43, the sixth session of gains.

Europe's benchmark index ended the week with a gain of 2.8 per cent, rallying after a sharp five-week correction spurred by worries that a rising number of defaults in the US subprime mortgage market could translate into big losses for financial institutions and dampen economic growth.

New US home sales unexpectedly rose in July while new orders for durable goods surged, data showed yesterday, easing investors' concerns about the US economy.

The robust data came one day after the head of Countrywide Financial Corp, the biggest US mortgage company, said the persistent downturn in the US housing market could lead to a recession.

But analysts warned that ripple effects from the turmoil in the US subprime sector still pose a risk for the economy.

"We expect the seizure in credit markets to gradually ease, but greater volatility, higher risk premiums and tighter lending standards are likely to persist. This should affect the wider US economy, most notably through lower demand for mortgages. Reduced access to capital might also slow business investment," ABN AMRO analysts wrote in a note.

Around Europe France's CAC 40 rose 0.8 per cent, outpacing UK's FTSE 100 index, up 0.4 per cent, and Germany's DAX index, down 0.1 per cent.

Financial institutions fell, with ABN AMRO down 1.1 per cent, as traders cited market talk that a consortium led by Royal Bank of Scotland could lower its bid for the Dutch bank. Sources close to the consortium said there was no substance to the rumour.

Barclays, which has also launched a bid for ABN AMRO, dropped 2.6 per cent.

Other financial institutions declined, with Allianz and BNP Paribas both dropping 0.9 per cent.

Standard Chartered fell 4.9 per cent, leading losers in Europe due to worries over a structured investment vehicle sponsored by the bank and to turmoil in Asia after three top banks revealed bigger-than-expected exposures to subprime mortgages.

StanChart said Whistlejacket Capital, an SIV created by the bank's structured credit investments team, was triple-A rated and its exposure was limited to an investment in the fund of around $250 million.

On the plus side, steelmaker Arcelor Mittal surged 6.3 per cent after traders said Merrill Lynch had upgraded the stock to "buy".

Belgian telecoms operator Belgacom rose 3.7 per cent after reporting first-half results above market expectations.

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