European shares end three-day losing run

European shares snapped their three-day losing streak yesterday, helped by banks recovering from recent losses on worries over some of the region's more exposed economies and Dubai's debt problems.

The FTSEurofirst 300 index of top European shares closed up one per cent at 1,004.90 points, after losing three per cent in the previous three sessions.

"We are not quite back at the safe zone yet. It is encouraging that it's rallying but we need to cross over some of the key levels," said Geoff Wilkinson, head of investment research at Mint Securities in London.

Mr Wilkinson said if the index failed to break through the resistance levels, "anybody who didn't sell in the first time tends to come in and sell the second time. That's what we are thinking in the market here."

Banks were the top gainers, with HSBC, Barclays, Royal Bank of Scotland, Lloyds, Credit Agricole and UBS up two to 6.5 per cent. Dubai's shares rebounded seven per cent, their largest one-day percentage gain for 41 weeks.

Across Europe, Britain's FTSE 100 was up 0.8 per cent. The Bank of England left its asset purchase programme intact at £200 billion (€221 billion) and held interest rates at 0.5 per cent, as widely expected.

However, industry sources said British banks had not struck a deal to reschedule Dubai World's debts, denying a newspaper report that the lenders had reached an agreement with the troubled state conglomerate.

Greek banks also recovered after Fitch Ratings cut Greece's credit rating this week while Standard & Poor's said it may lower the country's rating. National Bank of Greece, Alpha Bank and EFG Eurobank advanced 6.8 to 7.8 per cent.

Both Germany's DAX and France's CAC 40 advanced 1.1 per cent.

Volumes on the FTSEurofirst 300 were about 94 per cent of its 90-day daily average volume.

The pan-European index has rallied 56 per cent since hitting a floor in early March, and is up 21 per cent this year.

The FTSEurofirst 300 has traded in a broad range of 959.65-1,036.39 points in the past three months and has closed in positive and negative territory almost an equal number of times.

"The market will remain volatile until the end of the year," said Luc Van Hecka, chief economist at KBC Securities. "Most of the major long-term investors have already closed their books for the rest of the year. The market is really in the hands of traders."

The number of US workers filing new claims for jobless benefits rose more than expected last week, pushed up by layoffs in seasonal industries, indicating improvement in the labour market would be only gradual.

Miners were one of the main drags on the pan-European index, with Rio Tinto, Xstrata, Lonmin and Antofagasta down 0.2 to 2.1 per cent.