Rallying miners, techs help European stocks end higher

European stocks ended higher yesterday, helped by rallying tech and mining shares, but fears over the fate of US bond insurers dragged banking shares lower.

The FTSEurofirst 300 index of top European shares unofficially closed 0.5 per cent higher at 1,303.33 points. The index lost 3.7 per cent on the week.

News that Moody's Investors Services cut its "AAA" ratings for bond insurer XL Capital Assurance, a unit of Security Capital Assurance, heightened fears of more writedowns for banks.

French bank Credit Agricole lost 4.1 per cent, UniCredit dropped 2.6 per cent and BNP Paribas shed two per cent.

Mining shares gained ground, rising along with buoyant base metal prices. Anglo American gained 3.5 per cent and Rio Tinto added 2.1 per cent.

Tech shares were also on the rise, reversing some of their recent sharp losses. Nokia rose 3.1 per cent and Ericsson gained 3.3 per cent.

European shares had already risen by midday, helped by commodity stocks that tracked oil and copper prices higher, though pharmaceuticals limited gains as GlaxoSmithKline fell on a slew of price target cuts.

Crude jumped $1 a barrel due to heating oil demand in the US, pushing BP up one per cent and Total 0.4 per cent higher, while among miners, Kazakhmys and Antofagasta notched up gains of around four per cent as copper futures rose.

But drug-makers were led lower by GlaxoSmithKlinethe top weighted loser in Europe, down 3.3 per cent on a flurry of brokerage price target cuts after Thursday's shock warning from the group that earnings will fall in 2008.

Peer AstraZeneca, which issued a downbeat outlook last week, fell 2.7 per cent and Roche slipped 1.1 per cent.

Nordic telecoms group TeliaSonera tumbled 9.3 per cent after posting unexpectedly weak earnings and disappointing investors with a goal to only keep margins at recent levels.

Stocks were also pressured by a fall in US index futures, which pointed to a weak open on Wall Street.

Despite yesterday's gains, the FTSEurofirst 300 is still down nearly 14 per cent so far this year and analysts said the macro picture looked grim.

"The leading indicators continue to deteriorate around the globe, in some cases strongly," Gerhard Schwarz, head of global equity strategy at UniCredit, said in a note.

"In this environment, current valuations have lost importance as a support factor; the fears of a profit recession have increased substantially since the beginning of the year."

Heino Ruland, a strategist at FrankfurtFinanz in Germany, said: "The market is becoming aware that the crisis in the US will indeed have an adverse impact on growth in Europe".

Around Europe, Germany's DAX up 0.6 per cent and France's CAC up 0.3 per cent.

Societe Generale fell 2.2 per cent as French police widened an investigation into a trading scandal that lost the bank around $7 billion.

Franco-American telecoms group Alcatel-Lucent rose 3.9 per cent despite giving a weak outlook and scrapping its dividend as its annual loss came in smaller than analysts had forecast.

Tech stocks tumbled on Thursday after bearish comments from US group Cisco and German chipmaker Infineon but staged a recovery yesterday, with Nokia up 1.3 per cent and Ericsson up 1.9 per cent.

Telecoms also gained, with Vodafone up 2.3 per cent and France Telecom rising 2.2 per cent.

Construction group Sacyr Vallehermoso rose five per cent after a newspaper report that a French-backed group of banks and insurers were in talks to buy its one third stake in Eiffage.

The broader European market fell nearly two per cent on Thursday when the European Central Bank left euro zone rates at four per cent, as expected.

The bank was viewed to be more likely to loosen monetary policy after ECB president Jean-Claude Trichet stressed the risk of slower growth alongside inflation pressures, but this did little to reassure equity investors.

"No one is looking at interest rates with any particular enthusiasm as we're still worried about inflation," said Justin Urquhart Stewart, a director at 7 Investment Management.