European shares closed firmer for a second straight day yesterday, helped by a fall in oil prices from peaks above $50 a barrel and by gains in chemical company BASF on hopes of strong earnings.
Dealers said European indexes performed well given the amount of stock that entered the market on Tuesday, dominated by the sale of €2.6 billion worth of shares in French oil major Total.
Total closed down 2.2 per cent at €166.2 after France's state-owned electricity firm, EDF, sold its entire 2.3 per cent stake.
The FTSEurofirst 300 index, formerly named the FTSE Eurotop 300, closed 0.3 per cent firmer at 993.8 points.
Turnover was healthy at about €2.7 billion, and rising stocks outnumbered those that fell by about four to one.
"I suspect that as we approach the fourth quarter everybody is thinking that high (risk) sectors have been sold off an awful lot and wondering if we are going to get a seasonal rally in the market," said Simon Hallett, a European fund manager at Barings Asset Management.
"None of the background looks particularly conducive to that, with the high oil prices, lacklustre data and the bond market very strong, but we've been here before," he said.
The narrower DJ Euro Stoxx 50 index rose 0.5 per cent to 2,746.4 points.
Investors took heart from a slide in oil prices yesterday after US inventory data showed a surprise 3.4 million barrel increase in supplies in the past week. US light crude fell more than one per cent to about $49.30 a barrel.
Uncertainty about oil and economic growth, along with the choppy, range-bound trade that has marked much of 2004, has kept investors sidelined, analysts said.
"We need to see the emergence of a trend in the equity market, and once we do, money will start piling in because there's a lot of money on the sidelines," said Daniel Birch, a strategist at brokers Execution.
Mr Birch said he was confident stocks would shrug off concerns about the high oil price and uncertainty around the US presidential election but that gains would be more selective than they had been.
"In this particular stage of the economic cycle, which is the second leg of the bull market, not everything is going to go up like it did in 2003."
BASF was among the best performers, adding 3.5 per cent to €47.60 on expectations that continuing strong demand will allow it to achieve price rises that exceed raw material costs.
"There are parts of the market with pricing power, and there are parts where there is none," said Akber Khan from Deutsche Bank's European desk.
"People who are selling to consumers aren't able to raise prices, but those selling to industry can."
Deutsche Post fell 4.5 per cent to €15.74 after saying losses at its US express and logistics business would be €200 million more this year than it had previously expected.