European shares ended smartly higher yesterday, helped by gains in oil and bank stocks and a rally on Wall Street, but they declined slightly on the week, marking the first weekly loss in the last seven.
The FTSEurofirst 300 index of top European shares ended 2.3 per cent higher at 810.38 points, but lost 0.5 per cent on the week.
Across Europe, Britain's commodity and bank-heavy FTSE ended 3.4 per cent higher, while Germany's DAX rose three per cent and France's CAC added 3.1 per cent. The benchmark is off 2.6 per cent this year after a 45 per cent slide in the whole of 2008 amid a credit crisis that tipped top economies into recession.
Oils and bank stocks added most points to the index.
BP, Shell and Total rose 4.8-5.4 per cent as crude rose $1.91 a barrel to $51.53, while among banks, Royal Bank of Scotland Barclays and Fortis rose 5.7 to 8.6 per cent.
Across the Atlantic, the Dow Jones industrial average, the S&P 500 and Nasdaq Composite were up 1.6-2.2 per cent.
"There's enough coming through that a massive policy response can stabilise economies, and that alone can take markets off the floor," said Bernard McAlinden, strategist with NCB Stockbrokers in Dublin.
"It has stopped getting worse but there will be relapses because the US consumer will be in a trough for a few years and earnings are going nowhere, though they are not falling from horrendously low levels," he said.
New orders for US durable goods slipped 0.8 per cent in March, far less than Wall Street expected, while their gain in February was revised downward, Commerce Department data showed yesterday.
And sales of newly built US single-family homes dropped 0.6 per cent in March but the stock of homes for sales at the end of the month still plummeted at a record pace, other data showed.
Copper prices jumped 3.7 per cent, lifting mining stocks, which have had a strong run this year.
The DJ STOXX European Basic Resources index index has risen 22 per cent this year, easily the best performer among the sectoral indexes. Tech and retail stocks have risen 12 and 13 per cent respectively, the next best performers.
Xstrata was the top European gainer yesterday, vaulting 14 per cent after Cazenove, which upgraded the mining sector, said the stock remained its top pick.
"It is the most cyclical of miners and it's falling into a pattern of when risk appetite is up, Xstrat gains and when it retreats people move back to BHP Billiton," said a trader.
Tech stocks were the heaviest losers, with Nokia falling 4.2 per cent. US stocks rose on better-than-expected results from American Express and Ford.
But underlining the fact that data is sending mixed signals, US industrial groups 3M and Honeywell cut their 2009 profit forecasts, saying that economic conditions had deteriorated faster than they expected and show no signs of significant improvement anytime soon. The April reading for the German Ifo index came in stronger than expected, lifting some of the gloom over Europe's largest economy.
"Some things look as if they have turned, such as the services and manufacturing PMI (Purchasing Managers' Index) in the United States and Europe, and among the confidence indicators the Ifo is better and ZEW far better and the Michigan index looks as if it has bottomed," said NCB's McAlinden.
Markets are also choosing to react to only certain types of data, analysts said.
"The market is reacting to the sentiment indicators rather than the real economy data," said Brewin Dolphin chief strategist Mike Lenhoff.