European shares hit highest close since November 2008

European equities hit their highest closing level in nearly nine months yesterday and ended firmer for the 12th out of 14 sessions, as encouraging earnings results and soothing economic data boosted investor morale.

The FTSEurofirst 300 index of top European shares ended 2.2 per cent higher at 930.62 points, the highest finish since early November of last year. The benchmark index, now up 44 per cent since its lifetime low hit in March, has surged about 14 per cent over the past three weeks, but is still down around 43 per cent from its multi-year peak touched in mid-2007.

Across Europe, the FTSE 100 index, Germany's DAX and France's CAC 40 were up 1.7-2.1 per cent.

Financial stocks were among top gainers, with HSBC, Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas, Société Générale and Natixis rising between 1.3 per cent and 17.2 per cent. Stronger-than-expected earnings results have given a second wind to an equities rally that ran out of steam in June after a 38 per cent surge in the FTSEurofirst 300 from its record low.

"It is clear from the corporate pronouncements that in the vast majority of cases, companies' assessment of the situation is that the worst is over and that the outlook for the second half is improving," said Tammo Greetfeld, equity strategist at UniCredit Research.

Telecoms surged after several companies posted better results than expected.

Spain's Telefonica, Europe's top telecoms company, said its Spanish business was showing signs of stability; France Telecom reaffirmed its profit outlook and British telecoms group BT beat estimates.

Telefonica, France Telecom, Belgacom and BT all jumped between two and 12.6 percent.

"Increasingly it feels like the time is not right to worry about this strength running out of steam just yet," said David Jones, chief market strategist at IG Index.

The basic resources sector has been the top performer since July 10, with the DJ STOXX index rising 26 per cent over the period, followed by the auto index, up 25 per cent, the insurance index, up 21 per cent and the bank index, up 19 per cent.

Miners took strength yesterday from higher metals prices. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 4.5-8.3 per cent.

Among the STOXX 600 index's 95 companies that have reported results so far, 50 beat analysts' estimates, two matched and 43 missed the estimates, Thomson Reuters data showed.

The FTSEurofirst 300 stocks currently trade at 11.57 times expected earnings, the index's highest price-earnings ratio since May last year.

The market sentiment improved after data showed the number of Americans collecting long-term unemployment aid fell to the lowest in three months in mid-July, suggesting a slowing pace of layoffs as the economy stabilises.

Charts also suggested a bullish trend. In the past sessions, the FTSEurofirst 300 index has held technical support at the bottom of its uptrend channel extending back to mid-July, now at 906 points. The top of the channel is currently at 950 points.