Strong miners boost European shares as Greek banks dip

European shares ended at their highest level in nearly a week yesterday as strong US economic numbers on Friday and encouraging earnings boosted sentiment, although Greece's debt situation prompted investors to stay cautious.

The FTSEurofirst 300 index of top European shares finished up one per cent at 1,103.00 points, the highest close since April 20. The index has surged about 71 per cent since hitting a record low in March last year.

Optimism about economic growth and commodity demand helped the mining sector, which was also supported by a rise in key base metals prices. Copper hit a one-week high.

BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources jumped 1.9 to 7.1 per cent.

"The equity markets are rising despite the problems we see in Greece. What is saving the market is the solid macro-momentum that we currently see and the good first-quarter earnings season in the US," said Klaus Wiener, head of research at Generali Investments.

Figures on Friday showed that new orders for durable US manufactured goods excluding transportation posted the largest gain in over two years in March, while home sales hit an eight-month high, hinting at a pick-up in the pace of growth.

European banks were broadly higher, with the STOXX Europe 600 banking index rising 1.4 per cent. HSBC, Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas, Societe Generale and Natixis climbed 0.6 to 5.4 per cent.

But Greek banks shed 2.7 per cent, with National Bank, EFG Eurobank and Bank of Piraeus falling 3.6 per cent to 5.2 per cent.

"It (Greece) has reassured the market that the risk of a default is much less than previously thought last week... but there is still an element of doubt and that's why the market is volatile," said Joshua Raymond, market strategist at City Index.

Germany called for a financial rescue to be ready for Greece by a May 19 debt deadline after uncertainty over the terms and implementation of the aid package pushed Athens's borrowing costs up to a 12-year high.

Greece's efforts to reassure investors that aid would arrive in time to avert the eurozone's first sovereign debt default proved unconvincing, and there were signs a €45 billion EU-IMF aid package would have to be bigger.

Analysts said the Greek issue will ultimately get resolved.

"There will be a solution. The EU and the IMF will make sure that Greece gets the liquidity they need. At the same time, they will attach strong conditionality. Looking a bit down the road, the tension regarding Greece will be easing a bit," Mr Wiener said.

Bank of Ireland was up five per cent. It launched a plan to raise €3.4 billion without resorting to further state cash in a package the Irish government hopes will help differentiate it from Greece's woes.

Automakers were also higher on hopes that demand for vehicles will pick up. BMW, Daimler AG, Porsche, Volkswagen AG, Peugeot and Renault gained 0.1 to 1.6 per cent.

Among individual movers, Dutch navigation device maker TomTom surged 9.8 per cent after reporting better-than-expected first-quarter profit.

Industrial conglomerate Siemens added four per cent. German magazine Euro am Sonntag cited sources as saying the company is set to raise its profit forecast and post record earnings in 2009-2010.

Chloride Group surged 42 per cent after it rejected a £723 million approach from Emerson Electric, with the US industrials group expected to improve its offer to seal a deal this time around.