European shares closed higher yesterday, with drugmakers boosted by broker upgrades, while banks fell on a profit warning at Société Générale and oil firms were hurt by weaker crude.
The pan-European FTSEuro-first 300 index rose 0.2 per cent to close at 1,056.49 points, having gone in and out of positive territory several times during the session.
The European bench-mark is up more than 63 per cent from its lifetime low on March 9, as several major economies have emerged from recession and corporate pro-fitability has improved. "We are going to see a very choppy market over the next week or two, driven by corporate earnings," said Bob Parker, vice chairman of asset management at Credit Suisse.
He noted that aluminium producer Alcoa, which kicked off the US quarterly earnings season on Monday, disappointed investors. "But we are going to get splendid results from JPMorgan (on Friday). And there is still a lot of cash sitting on the sidelines," Mr Parker said.
Mr Parker added European fourth-quarter earnings would be up 25 per cent on a year earlier, and "that will set a positive backdrop for markets".
Most drugmakers rose. Credit Suisse upped its rating on Roche and AstraZeneca on valuation grounds to "outperform" and "neutral", respectively. Novartis, AstraZeneca, Roche and Sanofi-Aventis rose between 0.6 and 1.2 per cent. Citigroup also helped to buoy the sector, upping UCB "buy" from "hold". UCB rose 4.2 per cent.
Drugs-to-chemicals company Bayer rose 1.8 per cent. Among other risers in the strongly-performing chemicals sector, BASF gained 0.9 per cent after Goldman Sachs raised its target price. The vast majority of sectors rose, but the heavyweight banking sector helped to limit the index's gains.
Société Générale, France's second-biggest bank by market capitalisation, issued a profit warning after taking a new €1.4 billion ($2.03 billion) hit from risky assets. The stock fell 2.9 per cent. BNP Paribas, Banco Santander, Barclays, Credit Suisse, Deutsche Bank, HSBC and UBS fell between 0.7 and 1.7 per cent.
Across Europe, the FTSE 100 ended the day 0.5 per cent lower. Germany's DAX rose 0.3 percent and France's CAC 40 was flat.Wall Street was higher around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were up between 0.2 and 0.4 per cent. Kraft Foods rose 0.6 per cent after raising its profit forecast late last Tuesday and saying it was well-positioned to deliver "sustainable top-tier performance with or without Cadbury".