European stock markets closed stronger yesterday as oil shares tracked record crude prices and telecoms rose on robust sector results.
BP was up 2.7 per cent and Royal Dutch Shell 2.9 per cent as US oil prices hit a new record above $92 a barrel, helping UK equities outperform other markets.
The pan-European FTSEurofirst 300 index rose 0.6 per cent to close at 1,576.9, near the day's high of 1,580.3. It ended the week 0.8 per cent higher in choppy trade and has gained more than six per cent so far this year.
"We see markets up another three to five per cent before year-end as they play catch up with consensus earnings per share growth of eight to nine per cent for the year," European equity strategists at Merrill Lynch said in a note.
HSBC and Santander and miners Rio Tinto and Xstrata figured among the day's main European gainers. Telecoms also advanced, with TeliaSonera up 5.6 per cent after forecast-beating results.
Bid speculation also separately pushed up Standard Chartered Bank and retailer Kingfisher and boosted UK markets.
US stocks were all up between 0.5 and 1.3 per cent after a higher profit forecast by Microsoft Corp. An upbeat outlook by mortgage lender Countrywide Financial Corp also eased worries about losses in the troubled financial sector.
Fed policy-makers meet next week and financial markets widely expect the Federal Reserve to cut both the discount rate and overnight federal funds rate by at least 25 basis points.
"The market is increasingly worried about a recession," said Bernd Meyer, strategist at Deutsche Bank. "And if it now sees that the Fed is doing everything it can to prevent a recession, then the market should show some signs of relief."
Around Europe, Germany's DAX index edged up 0.2 per cent, the FTSE 100 index jumped 1.3 per cent and France's CAC 40 rose 0.6 per cent.
Some strategists warned of the risks to strong company earnings.
"Record oil prices and the strong euro are enormous threats to European companies," Marie-Pierre Peillon, head of equity and credit research at Groupama Asset Management, in Paris.
"With geopolitical risks adding to oil prices' momentum, we don't see how prices will start falling. The question is: Are we in a new oil crisis like we've seen in the past?," she said.
Swedish engineering group Sandvik fell five per cent after posting a smaller-than-expected rise in quarterly pretax earnings while Dutch retailer Ahold lost five per cent on worries over its under-performing stores in the United States.
Among gainers, shares in Volkswagen jumped four per cent as the carmaker's finance chief said he expects the company's fourth quarter performance to be in line with other quarters this year.
Considering that the group's run rate for pre-tax profit is over €1.5 billion per quarter, a similarly strong quarter would suggest earnings would total some €6.3 billion, far better than the group's current focus of at least €5.1 billion.