European shares shrugged off their earlier losses to close higher yesterday as a bounce in auto and technology stocks helped offset lower mining stocks and worries about slowing global growth.

Among the stream of companies reporting earnings, Aviva dropped despite posting a healthy profit jump, while Commerzbank tumbled after a weaker-than-expected performance in its key units.

The FTSEurofirst 300 index of leading European shares closed up 0.7 per cent at 1,340.7 points, after earlier dipping to a near two-week low. "There's still good value, clearly it's been an earnings driven market," said Harry Talbot Rice, a global fund manager at Sarasin Investment Management Ltd. "Globally the rate at which earnings have surprised the market is beginning to slow. But if you look historically, until earnings growth actually starts to go more negative, there's still scope for the market to rally."

Volkswagen led carmakers higher with 3.2 per cent rise on speculation its biggest shareholder Porsche may expand its stake. Porsche added 2.2 per cent.

Tyremakers gained, with Continental up three per cent and Michelin gaining 2.8 per cent on hopes they can outstrip their Japanese rival Bridgestone whose profit was hit by higher costs.

In the technology sector, Nokia added 2.8 per cent on the back of higher forecasts from bellwether Cisco Systems.

Elsewhere in the sector, Alcatel gained 2.8 per cent and Cap Gemini rose 2.2 per cent. Infineon recovered from its early losses to gain 1.7 per cent after shares in its Qimonda unit debuted on the New York Stock Exchange slightly above their issue price.

Mining stocks sank, with Rio Tinto down one per cent and BHP Billiton falling 0.9 per cent as the strike continued at their joint-owned Escondida mine in Chile.

Xstrata fell 1.2 per cent after Canadian miner Falconbridge recommended its shareholders tender to the Swiss-based company's takeover offer.

Among companies reporting, Britain's largest insurer Aviva fell 1.9 per cent despite a 27 per cent rise in first-half profit as traders said many of the headline results had already been priced in.