European stocks close up 1.5 per cent

European shares closed higher for a third straight session yesterday, with banks gaining on strong results from Goldman Sachs, while firm metals prices helped miners.

The pan-European FTSEurofirst 300 index of top shares closed 1.5 per cent higher at 789.95 points, after rising more than two per cent to a two-month high earlier in the session.

Across Europe, the FTSE 100 index was up 0.1 per cent, Germany's DAX was up 1.5 per cent and France's CAC 40 was 0.9 per cent higher.

Banks were among top gainers in Europe after Goldman posted a much higher-than-expected first-quarter profit as it took more trading risk, and said it plans a $5 billion common share sale to help pay back government funds. "The banks reacted nicely to the Goldman earnings. It has been quite an encouraging day," said Jim Wood-Smith, head of research at Williams de Broe.

"Though the initial reaction to the US retail sales saw some profit-taking after a weak headline March number... further reflection on the retail sales figures showed a revision to the February output number. Investors were back in the market," he said.

The US Commerce Department said total retails sales dropped 1.1 per cent in March after rising by a revised 0.3 per cent in February, previously reported as a 0.1 per cent fall.

A separate report from the Labour Department showed US producer prices fell in March and also recorded their largest year-over-year decline since 1950 as subdued demand made it hard for producers to raise prices.

Swiss bank UBS soared 15.4 per cent after the group said it is cutting three per cent of its Asia-Pacific staff, in what banking sources said was part of a fresh round of global job cuts at the crisis-hit bank.

Barclays jumped 10.1 per cent, helped by a weekend report that said it would listen to offers for its asset management arm BGI after its sale of iShares last Thursday.

Miners were higher as copper rose 2.1 per cent.

Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were up between 3.4 per cent and 7.2 per cent.

Volkswagen gained 2.4 per cent after it said it sold nine per cent more cars in mainland China and Hong Kong in March, setting an all-time record for monthly sales as Beijing's policy initiatives bolstered consumer confidence. "People have been seeing some green shoots," said Georgina Taylor, equity strategist at Legal & General Investment Management.

"But there's absolutely no evidence that final demand is recovering. Equity markets are doing what they typically do, trying to pre-empt the recovery, a couple of quarters ahead."

Oil stocks slipped as crude fell 1.1 per cent. BG Group, BP, Royal Dutch Shell and Total were down between 0.5 per cent and 1.7 per cent. Drugmakers were in the doldrums as investors switched into cyclicals. Sanofi-Aventis, Novartis, Novo Nordisk and Roche were down 1.8 per cent to 3.4 per cent.