European stocks inched higher yesterday, as Siemens calmed investors' fears over corporate results, offsetting grim US consumer confidence data.
The German industrial conglomerate stuck to its full-year profit outlook, sending its stock up 2.8 per cent and boosting industrial shares such as Alstom's, which gained 4.2 per cent.
The FTSEurofirst 300 index of top European shares staged a late rally and closed 0.1 per cent higher at 785.64 points. The benchmark index soared 3.2 per cent on Monday.
Around Europe, the UK's FTSE 100 index dropped 0.4 per cent, hit by the profit taking on big pharma stocks as well as a drop in a number of heavyweight mining shares such as Xtrata, which fell along with metals prices on demand worries.
Xtrata shed 4.9 per cent, and Anglo American lost 1.3 per cent.
Germany's DAX index fell 0.08 per cent and France's CAC 40 was 0.03 per cent lower.
"Short-term rallies are to be expected, but stocks will certainly revisit their historical lows before we get an L-shaped recovery, with anaemic growth for a while," said Pierre Sabatier, head of strategy at Pythagore Investment, in Paris.
"More forecast downgrades are to be expected. Typically, in a recession, the margin of error of analysts explodes.
"Their estimates are usually backwards-looking," he said.
Stocks had fallen more than one per cent in afternoon trade after data showed US consumer confidence fell to a record low in January, hit the ongoing housing slump and bleak job market, fuelling fears over the outlook for the world's biggest economy.
The Conference Board, an industry group, said its sentiment index fell to 37.7 from a revised 38.6 in December, confounding forecasts for a small uptick.
Recently hammered banks added to their previous session's recovery, with Royal Bank of Scotland up 8.3 per cent, Credit Agricole up 3.2 per cent, Bank of Ireland up 7.7 per cent, and BBVA up 2.8 per cent.
Despite the two-day rally, the DJ Stoxx banking index is still down 16 per cent this year. The FTSEurofirst 300 is down 5.6 per cent in 2009.
Auto stocks, beaten down over the past few weeks, were also on the rise yesterday, with BMW up two per cent, Daimler up 3.1 per cent, and Peugeot up 2.6 per cent.
Pharmaceutical shares, which have been outperforming the market this month, were among the biggest losers, with AstraZeneca down 3.9 per cent, Roche down 2.4 per cent, and Sanofi-Aventis down 2.7 per cent.
Shares in chemical companies lost ground, dragged by a downbeat note from J.P. Morgan, citing potential further earnings risk from progressive price erosion.
"Collapsing demand in a number of key end markets will, we estimate, trigger average volume losses in fiscal 2009 of 6.3 per cent across the sector.
We expect most of this contraction will be felt in the first half of the year, with those most exposed losing between eight per cent and 10 per cent of volumes during 2009," J.P. Morgan analysts wrote.