European shares up for second week in tech-led rally

European shares rose yesterday, led by technology stocks, after Swedish telecom equipment maker Ericsson roundly beat expectations with its earnings figures, while the banking sector stabilised.

Ericsson shares rose as much as 27 per cent at one point during the day, after the mobile phone network equipment maker's surprisingly robust first-quarter profits.

Ericsson shares ended up 16.6 per cent, helping push the DJ Stoxx index of European technology shares up 3.4 per cent, putting it on track for its first monthly gain since September last year.

Beyond techs, financials were the top performing sector, gaining after a couple of weeks in which results at several institutions have not been quite as bad as feared, and a number of banks have taken measures to shore up their balance sheets, giving investors confidence that perhaps the worst of the credit crunch is over.

The FTSEurofirst 300 index of top European shares was up 1.1 per cent at 1,330.84 points, having hit a session peak of 1,336.70 - its highest since late February - which marked a gain of as much as 1.6 per cent.

The index has risen nearly 0.4 per cent this week, putting it on track for a 5.4 per cent gain in April, making this its best monthly performance since October 2003.

But the European equity market is still nearly 20 per cent below last year's highs and has lost 12 per cent this year as interbank lending rates stay high and economic data suggests the slowdown in the United States is spreading.

This week in the eurozone, German business sentiment hit its lowest since January 2006, while eurozone manufacturing data came in soft enough to boost expectations for a cut in regional interest rates this year.

"The economic data in Europe is starting to deteriorate... yet at the same time, the cyclical area of the market is producing reasonable numbers and guidance," said Andrea Williams, head of European equities at Royal London Asset Management.

"There is a definite disconnect between the economic data and the credit crisis and the impact that has on share price performance."

About 10 per cent of the components of the broader DJ Stoxx 600 index have reported first-quarter earnings, and more than half have beaten expectations, according to data from Thomson Reuters.

This week major cyclical names such as BASF, Bayer and ABB have delivered results that beat forecasts, raising hopes among investors that the resilience of the emerging market world may be enough to offset weakness stemming from a US or European slowdown.

The technology sector has been one of the better performers this week thanks to strong earnings at some of the major US firms such as Intel and IBM. In Europe, Alcatel-Lucent was up 6.4 per cent, and STMicroelectronics rose 5.5 per cent.

The DJ Stoxx European bank index was up 1.7 per cent, with UBS rising 3.6 per cent, Credit Suisse 2.5 per cent and Barclays 2.6 per cent.

"The sentiment overall is good, probably because there's no new bad news from the bank sector," said Stefan Chmielewski, a trader at Lang & Schwarz brokerage in Duesseldorf.