Commodity gains lift European stocks, led by oils

European shares closed up yesterday, lifted by commodity stocks, but recovering only a fraction of their previous session's losses.

Analysts said sentiment may have been boosted by Wall Street's rebound and a strong performance earlier in Asia.

The FTSEurofirst 300 index of top European shares ended up 0.51 per cent at 1,165.31 points.

The index had its worst loss in more than a month on Tuesday, falling 2.5 per cent.

"After losing two-and-a-half per cent you may have a recovery of a half a point," said Franz Wenzel, senior strategist at AXA Investment Managers in Paris.

Mining stocks and heavyweight oils were the biggest advancers, lifted by earlier strength in the oil market when oil edged up above $115 a barrel. Crude was later down sharply, closer to $113, after data showed a large US supply build. The DJ Stoxx European basic resources index rallied 4.1 per cent. Rio Tinto was up 7.4 per cent and BHP Billiton 6.7 per cent.

Oil explorer Tullow Oil jumped 6.8 per cent after UBS raised its recommendation on the stock to "buy" from "neutral".

At the other end of the scale, fixed line telecoms and food and drug retailers were the biggest losers.

Supermarket chain Carrefour closed down 3.1 per cent.

Britain's FTSE 100 outperformed because of its miner and energy element, gaining 0.97 per cent. Germany's DAX rose 0.6 per cent and France's CAC was up 0.8 per cent.

European stocks are down some 22 per cent this year, hit by a toxic mix of slowing economies, bank losses and soaring oil prices feeding into inflation worries.

They are on track for their ninth month of losses out of the past 10.

Technology shares got a boost from Hewlett-Packard results that beat estimates overnight and from a deal announced by STMicroelectronics and Ericsson to combine their chip and mobile applications businesses. STMicro gained 2.4 per cent and Ericsson rose 0.5 per cent. Earnings news lifted Telekom Austria and SBM Offshore.

SBM Offshore clocked up 2.1 per cent after the Dutch oil industry supplier beat expectations with its first-half earnings.

Shares in Telekom Austria rose 3.3 per cent as investors shrugged off weaker-than-expected second-quarter results and instead took solace in the group confirming its outlook.

French oil services group CGG Veritas shares rose 7.7 per cent as traders cited an upbeat Lehman Brothers note published on Tuesday.