Banks and miners push European stocks higher

European stocks rose yesterday, with banks gaining ground after BNP Paribas delivered better-than-expected earnings and commodities rallying after Xstrata launched a $10 billion bid for Lonmin.

The FTSEurofirst 300 index of top European shares closed 0.9 per cent higher at 1192.99 points, tapping a seven-week closing high following a 2.6 per cent rally on Tuesday. Markets were relatively calm and the FTSEurofirst traded between 1,181.95 and 1,194.40.

Banks were among the biggest risers after BNP Paribas beat expectations with its second-quarter earnings report. The stock gained 5.2 per cent, while the DJ Stoxx European Banks index rose 1.2 per cent.

In a note to clients, Cheuvreux highlighted the group's resilient performance in its French and Italian retail operations as well as a good overall corporate and investment banking performance.

Société Génerale added three per cent and UBS rose 3.7 per cent. Commerzbank on the other hand fell 1.5 per cent on disappointment over its outlook despite solid second-quarter numbers.

"The results from BNP and Commerzbank were OK, which helped, and the Federal Reserve also reassured at the margins," said Bernard McAlinden, market strategist at NCB Stockbrokers in Dublin.

"Its statement implicitly seemed to signal that they are not close to raising rates, and that helped as well," he added.

Investors are now awaiting rate decisions by both the Bank of England and the European Central Bank, due today.

Although economists do not expect the European Central Bank to change rates, the focus will be on the statement by President Jean-Claude Trichet. "There are some concerns that it (the ECB) won't be moving in a dovish direction even though we had evidence of a weakening economy," McAlinden noted, adding that when looking at the central bank's monthly bulletin, the focus was very much still on wage settlements.

Around Europe Britain's FTSE was up 0.6 percent, Germany's DAX up 0.7 per cent and France's CAC up 1.4 per cent.

Miners were in focus after Xstrata unveiled a $10 billion takeover bid for the world's third-largest platinum producer, Lonmin. Shares in Lonmin, which swiftly rejected Xstrata's takeover bid, jumped 47.7 per cent, while Xstrata fell 1 percent, Anglo-American added 3.2 per cent and Vedanta gained three per cent.

Corporate takeover talk also pushed automotive stocks higher. Daimler rose 3.2 per cent on the back of a report in the Financial Times which said the luxury car maker was discussing defence strategies with Deutsche Bank against a possible hostile investor.

Supplier Continental was up one per cent as Handelsblatt reported the group was in talks with private equity firms Apollo and KKR about a white-knight approach to thwart unwanted advances from Schaeffler.