European shares hit 11-week highs

European stocks closed at an 11-week high yesterday, led by banking standout Santander and raw material companies boosted by higher crude oil and copper prices.

The pan-European FTSEurofirst 300 index advanced 1.9 per cent to 816.40 points, its best close since February 9, leaving it 1.9 per cent shy of its end-2008 close and 26.5 per cent above this year's low-point set on March 9.

"There is a bit more money coming in to the stock markets, but it is not much yet," said Ralf Groenemeyer, strategist at boutique investment bank Silvia Quandt.

"You are not seeing aggressive selling any longer," he said.

Thorsten Schrieber, founder and chief executive of asset managers Wallberg Invest, agreed that investor sentiment had improved.

"We are getting positive reactions from some of our customers after the recent market recovery," Mr Schrieber said.

Banks added most points to the index, with Barclays rising 10.4 per cent while Spain's Banco Santander and BNP Paribas added 6.1 per cent each.

The Spanish bank's first-quarter profit beat market consensus.

"Santander's results have certainly helped sentiment in the sector across Europe," BetOnMarkets.com analyst David Evans said in a note.

HSBC upgraded Barclays to "overweight" from neutral and BNP Paribas received a boost from the approval of a deal that gives it a majority stake in Fortis Bank and makes BNP the euro zone's largest deposit holder.

Credit Suisse added BNP Paribas to its Europe Focus List, saying the stock was trading at an "unjustified 15 per cent discount" to the European banking sector.

"BNP is the only French bank we would buy at present," said Credit Suisse, which rates the stock "outperform".

Nordea, the Nordic region's biggest bank by value, gained 9.6 per cent after a smaller-than-expected fall in first-quarter profits.

Insurance shares rose 4.2 per cent on the DJ Stoxx sector index, led by a 6.6 per cent rise for Munich Re.

JPMorgan upgraded Munich Re to "overweight" from "neutral".

"The key reason to own Munich is that the very strong capital base means there is in our view negligible dilution risk and potential stronger earnings growth as it redeploys some of the excess capital to operations," JPMorgan said in a note.

Outside financials, engineering conglomerate Siemens gained 8.2 per cent after a higher-than-expected quarterly profit.

"The market may have feared that Siemens' (2009/10) sector profit might drop below the previous year's €6.5 billion. The company's new guidance provides confidence that this will not be the case," said Commerzbank, which rates the stock "add".

Next to banks, oil & gas contributed most points to the FTSEurofirst 300 index, lifted by an almost 1.5 per cent rise in the price of crude oil to over $50.5 a barrel. Petroplus firmed 4.0 per cent, StatoilHydro and Dana Petroleum rose 2.7 per cent each and ENI added 1.9 per cent.

Mining shares also gained, with Anglo American up 7.5 per cent, Rio Tinto up 6.5 per cent and Vedanta up 5.7 per cent as base metal prices rose strongly.