European stocks closed higher yesterday, helped by a generally upbeat outlook for equities in the year ahead with French engineering group Alstom leaping on expectations of buoyant sales.

Markets rose despite trading updates from oil major BP, German retailer Metro and French car maker Peugeot Citroen which contained elements of disappointment and sent the firms' shares lower.

Equities remain underpinned by generally upbeat corporate earnings and rising metal and energy prices boosting commodity shares, while low European interest rates and an end in sight to US monetary tightening have also helped.

The pan-European FTSEurofirst 300 index closed 0.55 per cent higher at 1,307.59 points.

Early European fourth-quarter figures have been mixed, and some analysts believe the picture may be beginning to unravel.

"We don't think this is going to be the fourth year in a row of profits strongly beating expectations," said Mislav Matejka, European equity strategist at JP Morgan. "Some of the headwinds that US markets faced in 2005 - namely rising interest rates and a strong currency - are going to be the headwinds that European equities are likely to face in 2006."

Alstom shares were 4.7 per cent higher after earlier climbing to €57.50, its highest in almost two years.

Analysts expect Alstom, which won a €241.7 million rail order from Spain's Renfe, to post buoyant third quarter sales on Thursday with CSFB's Julian Mitchell tipping 32 per cent comparable order growth and a two per cent sales growth.