European shares rose yesterday as gains in banks, energy stocks and French equities offset falls in autos and drug makers and a slide in Rio Tinto after BHP Billiton abandoned a bid for the miner.
The FTSEurofirst 300 index of top European shares ended up 0.57 per cent at 833.36 points, after having traded in a wide range of 812.89 to 848.92, or between 1.9 per cent lower and 2.5 per cent higher.
French stocks were outperformers after President Nicolas Sarkozy said that the government would launch a major stimulus plan to revive the flagging economy within the next 10 days.
Across Europe, Britain's FTSE 100 rose 0.4 per cent, Germany's DAX ticked up 0.1 per cent and France's CAC ended 1.2 per cent higher.
Cement group Lafarge, banks Société Générale and Credit Agricole, and steelmaker ArcelorMittal all gained more than seven per cent.
On the other side of the Atlantic, the US Federal Reserve announced a plan to buy billions of dollars worth of debt and mortgage-backed securities to loosen up the flow of credit for mortgages, loans for students, autos and credit cards.
Banks and energy stocks added most points to the European index.
HSBC gained six per cent and Credit Suisse jumped 11 per cent, while Standard Chartered rose 16 per cent as its plan to raise £1.8 billion in a rights issue removed a a worry about its funding position, analysts said.
BP gained 1.5 per cent and BG Group rose four per cent.
However, Rio Tinto plummeted 37 per cent after BHP Billiton abandoned its bid for the group, while Novartis, GlaxoSmithKline and Sanofi-Aventis lost 2.5-4.1 per cent ahead of an EU report on Friday expected to criticise major European drugmakers for anti-competitive practices.
Volkswagen fell 23 per cent, continuing its recent wild counter-index moves.
The stock has endured falls of 10 per cent or more in a day seven times in the last three months, and risen by 10 per cent or more five times, driven by a short squeeze.
Macro economic news, however, continued to be gloomy.
The FTSEurofirst 300 has slumped 45 per cent this year, punctured by a credit crisis that piled up losses at banks and tipped major economies into recession.
The US economy contracted at its fastest pace in seven years in the third quarter as consumer spending plunged to a 28-year low, data showed on Tuesday, raising the spectre of a deeper recession.
In addition, German Finance Minister Peer Steinbrueck said that the German economy could contract by as much as one per cent next year after official figures showed fading exports led the country into recession in the third quarter.
Analysts have been downgrading earnings estimates through the year, realising that the macro environment has made their initial calculations far too optimistic.
"The over-optimism in the consensus earnings estimates is widespread across sectors," UBS strategist Nick Nelson wrote in a note, adding that, from a top-down perspective, he expected earnings to fall around 30 percent peak to trough across Europe.