Telecoms, commodities bolster Europe stock rebound

European shares ended higher yesterday, as promises of higher returns to shareholders at Telefonica lifted telecoms, and commodity stocks gained from higher oil and metal prices.

The FTSEurofirst 300 index of top European shares ended 0.62 per cent higher at 1,599.43 points, making it the 10th day of gains in the last 12. The close is the highest since July 23.

The index has gained around three per cent so far this month, putting it on track for a recovery after worries linked to credit markets took 13 per cent off European shares in one month from mid-July.

Spanish telecoms group Telefonica gained seven per cent to be the heaviest positive influence on the index after it forecast surging earnings and dividends over the next four years.

British rival Vodafone climbed five per cent, lifted also by market talk that chief executive officer Arun Sarin would leave the company, traders said. Vodafone declined to comment.

And France Telecom gained 4.2 per cent to top gainers on the French CAC 40 benchmark.

"The recovery in Europe, in common currency terms, has been as full as in the United States," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.

"The bull market is unambiguously driven by commodities and service companies around oils and miners," he said.

"The momentum is with equities, which are the number one asset of choice after non-government fixed interest, real estate-related assets and hedge funds were similarly tainted, for various reasons," he added. Oil and gas was the top gainer among the sectors, lifted by a $2 rise in the price of crude and a revamp at BP that involves slashing management layers, adopting consistent field development procedures and reducing costs.

BP gained 2.3 per cent, Royal Dutch Shell rose 2.5 per cent and Total 0.8 per cent. BG group rose 4.7 per cent.

Gold hit a 28-year peak and platinum set a record, and with copper prices high for much of the stock-market session, miners thrived.

Vedanta Resources gained 5.8 per cent, while BHP Billiton, Kazakhmys and Xstrata all rose 4.0-4.4 per cent.

The FTSEurofirst benchmark capped a bull run by hitting a six-and-a-half-year high in mid-July, but then slid as investors worried a crisis in risky US mortgages would spread through a credit market crunch to poison the wider economy.