European shares end higher

European shares ended higher yesterday after a choppy session, as financials regained ground after Wells Fargo posted a record first-quarter profit and US home prices rose in February.

Market sentiment also improved after US equity markets jumped, with JP Morgan's upgrade of Caterpillar lifting big manufacturers, while US biotech shares got a boost from better-than-expected results from Gilead Sciences.

The FTSEurofirst 300 index of top European shares closed one per cent higher at 794.25 points after falling as much 1.4 per cent earlier.

The index is down 4.4 per cent this year after slumping 45 per cent earlier in the year on the financial crisis, which began with US mortgage defaults in 2007 and pushed much of the world into deep and vicious recession.

But there were some signs of hope. Prices of single-family homes in the United States rose by a seasonally adjusted 0.7 per cent last February from January.

Banks recovered after slipping earlier in the session on disappointing quarterly results from Morgan Stanley. Standard Chartered Bank rose 4.6 per cent, Barclays jumped 9.6 per cent, Deutsche Bank was up 6.7 per cent and Commerzbank surged 9.6 per cent.

"There has been a pretty impressive relief rally and may be we can go higher by another five per cent, but sooner or later reality is going to be there," said Koen De Leus, economist at KBC Securities.

"And the reality is that we are in a recession. Consumers are not spending because they want to save more."

Nervousness in the market was highlighted again after Morgan Stanley posted a wider-than-expected quarterly loss and slashed its dividend, pushing European shares down 1.4 per cent at one point.

"In the medium term, we're trying to find a bottom. That's the bottom line," said John Haynes, strategist at Rensburg Sheppard.

"The test is the earnings season - that stocks suffer bad news but react well to that. So far they're not passing that test, but not failing it decisively either."

Miners gained on firmer gold, aluminium and copper prices. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources were up 2-7.7 per cent.

Energy stocks were broadly higher. BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol and Total rose between 0.6 and 2.1 per cent.

But pharma shares fell, led lower by Roche as a cancer drug Avastin - a key Genentech asset now wholly owned by Roche - failed in a major study to prevent the recurrence of colon cancer in patients who have undergone surgery.

Roche shares were down 10.4 per cent, while AstraZeneca declined 0.3 per cent and Shire was down 0.4 per cent. GlaxoSmithKline fell two per cent, also hit by first-quarter results which fell short of expectations.