European stocks extended early gains yesterday as Credit Suisse shares surged after the Swiss banking group beat earnings expectations and telecoms stocks rallied despite Wall Street opening weaker.
Led by Credit Suisse, financial stocks were the major focus with Dutch insurer Aegon also rallying after an asset sale pulled in $5.4 billion.
"Credit Suisse showed what is possible. Corporate finance business seems to be picking up and you are seeing more and more deals," said Ulf Moritzen, fund manager at Nordinvest in Hamburg.
But shares in Royal Bank of Scotland fell more than four per cent after failing to win over investors with a 10 per cent rise in first-half profits.
Mr Moritzen said despite the strength in financial stocks he was more inclined to invest in cyclical sectors, like telecoms.
"Financial stocks have had a good run and have risen substantially. I see a good hold and a change into telecommunications."
Telecoms stocks, led by Cable & Wireless Plc's 4.16 per cent gain and BT Group's 2.83 per cent per cent rise, added further positive impetus to European markets.
By 1348 GMT the FTSE Eurotop 300 index of pan-European blue chips added 0.92 per cent to 873 points and the narrower DJ Euro Stoxx 50 index rose 1.17 per cent to 2,484.
In New York, the Dow Jones Industrial Average fell 0.3 per cent and the tech-rich Nasdaq Composite stood 0.4 per cent lower as investors awaited results from tech giant Cisco and economic data on the US services sector.
Among leading national market indices around Europe, the Swiss blue chip index rose 1.44 per cent, while London's and Paris's CAC-40 were 0.58 and 1.6 per cent higher respectively. The German DAX added 1.11 per cent.
US non-manufacturing ISM numbers for July, due out at 1400 GMT, will give further details on the health of the world's largest economy.
In Europe, Reuters Eurozone business activity index, which covers service companies ranging from airlines to banks to hotels, bounded through the 50 mark that divides shrinkage from growth to 50.2 in July from 48.2 in June.
Signs of a turnaround in the fortunes of top-10 European bank Credit Suisse provided some encouragement for bulls betting on further gains for equities.
It surged as much as 5.6 per cent after its net profit for the second quarter rebounded to 1.3 billion Swiss francs, beating even the most optimistic expectations.