European shares extend week's gains

Europe's leading stock markets extended the week's gains yesterday, buoyed by more strong earnings news from the US financial sector, but analysts hinted the surge may be running out of steam.

London's FTSE 100 index closed 0.35 per cent higher at 4,361.84 points after more positive earnings from the United States, where banking giant JPMorgan reported strong second-quarter results.

In Paris the CAC 40 index closed 0.89 per cent higher at 3,199.68 points and Frankfurt's DAX rose 0.58 points to 4,957.19.

Banking stocks benefited, with HSBC shares up 1.1 per cent and Barclays 0.5 per cent in London, where the overall market was nevertheless off its earlier highs.

"Trying to be optimistic, a successful test of the 4,400 level (for the FTSE) would be the next technical point to watch for," said analysts at investment firm CMC.

"But just how long the rally can be drawn out is a cause for debate."

Among banking shares in Paris, Credit Agricole rose 2.08 per cent and BNP Paribas 1.66 per cent.

US stocks wavered in and out of positive territory as a looming bankruptcy at major lender CIT Group overshadowed the flurry of positive earnings reports.

The Dow Jones Industrial Average dipped 0.05 per cent to 8,612.13 in early trade. The technology-heavy Nasdaq edged up 0.08 per cent to 1,860.95 while the broad Standard & Poor's 500 index retreated 0.29 pe cent to 929.93.

"Following a nearly 6.0 per cent rally in the Dow Jones Industrial Average during the past three days, traders appear ready to take some profits off the table," said Joseph Hargett of Shaeffer's Investment Research.

JPMorgan Chase, the second-largest US bank by assets, said net profit jumped 36 per cent in the second quarter, to $2.7 billion, a 36 per cent increase from the equivalent figure last year.

Investors are keenly watching this round of quarterly results to see whether massive public aid and better conditions in the stock market have positioned the ailing sector for recovery.

US Treasury Secretary Timothy Geithner said yesterday the stricken US financial system was poised for recovery and stimulus measures to calm the crisis would hit home in the second half of this year.

Earlier in the week, US banking giant Goldman Sachs had reported 65 per cent jump in second-quarter net profits.

The prestigious financial firm was the first of the big guns in the sector to report latest quarterly earnings. Bank of America and Citigroup are to reveal their results today.

Dealers in Europe were also awaiting the publication later on Thursday of second-quarter earnings from major US companies, Google and IBM.