Market overview

European shares hit a near six-week closing high yesterday, with HSBC rebounding and miners supported by firm metals prices, offsetting falls in Prudential after it agreed to buy AIG's Asian insurance arm.

The pan-European FTSEurofirst 300 index of top shares closed 0.8 per cent higher at 1,027.29 points, hitting its highest closing level since January 21. Banks were among the biggest gainers, with heavyweight HSBC up 2.7 per cent, after sharp falls in the previous session following the release of its results.

Within the sector, Barclays, Société Générale, BNP Paribas and Deutsche Bank added 0.7 to 3.1 per cent. "The earnings results that we're seeing have been very good," said Mike Lenhoff, chief strategist at Brewin Dolphin.

"The recovery that's coming through globally is showing up in better revenues and there is a green light out there for equity markets because the Fed is not going to change interest rates for some time."

Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 were up between 1.1 and 1.45 per cent. Greek banks added 3.3 per cent ahead of a meeting between German Chancellor Angela Merkel and the Greek Prime Minister on Friday, as confidence grows in financial markets that Athens might be nearing a deal with European Union governments to take more budget consolidation steps in return for some form of aid.

"The issue concerning sovereign debt is still present but it looks as if there will be an eventual resolution to it and the markets are less hung up about it," Mr Lenhoff said. Greek Prime Minister George Papandreou has called a cabinet meeting for today to "take decisions about the economy". The announcement appeared to signal that Athens is poised to take new savings measures in the hopes of winning EU support.

Miners were higher, underpinned by metals prices which stayed in positive territory. Anglo American, Eurasian Natural Resources, Kazakhmys, BHP Billiton and Xstrata rose 1.8 to 2.9 per cent.

Bucking the trend, Vedanta Resources shed 3.3 per cent as the India-focused mining group launched a $775 million convertible bond issue yesterday, seeking to refinance debt at lower interest rates.

Among individual gainers, L'Oreal gained 2.7 per cent after the Daily Telegraph reported that Swiss food group Nestlé was rumoured to be in informal talks to buy Liliane Bettencourt's 31 per cent stake in the French cosmetics group. Nestlé was up 0.6 per cent.

Kuehne & Nagel International was among the biggest gainers, up 6.3 per cent after announcing results, with brokers JPMorgan and Vontobel hiking the firm's target price while Deutsche Bank raised its recommendation to "buy" from "hold".

On the downside, Prudential fell eight per cent, extending its decline for the second session. On Monday, the insurer said it would pay $35.5 billion for American International Group's Asian life insurance arm, and would undertake a $21 billion rights issue.

Yara International fell 4.4 per cent after US based fertiliser maker CF Industries Holdings Inc relaunched its hostile bid for Terra Industries Inc, betting the higher price of $4.75 billion will help it break up Terra's planned takeover by Yara International.

Gains on Wall Street pushed the Dow index into positive territory for 2010, a day after both the S&P 500 and Nasdaq moved above the break-even mark for the year.