European shares ended yesterday at levels last seen in mid-May, buoyed by solid earnings from Volkswagen and other market heavyweights, new merger hopes among utilities, and energy stocks propped up by oil prices.

Carmaker DaimlerChrysler, advertising group Publicis, bank Santander, software firm Dassault Systemes and IT consultant Capgemini all shone on one of the busiest reporting days of the year.

There were a few disappointing updates, from drugmaker AstraZeneca, France Telecom and Siemens, but these did not sour the overall positive earnings crop.

The FTSEurofirst 300 index of top European shares gained 1.05 per cent to end at 1,334.69 points, a level last seen on May 16. It is now only five per cent away from a takeover-fuelled near-five-year peak set in early May.

"The earnings are mostly in line with expectations; I should say slightly better than expectations," said Adrian van Tiggelen, director of European equities at ING Investment Management, though he said concerns remained about global corporate growth.

"The earnings revisions ratio - positive revisions versus negative revisions - is gradually deteriorating globally," said Mr van Tiggelen, adding that he was taking a slightly more defensive stance in his portfolios than previously.

US durable goods and jobless claims data suggested the world's biggest economy may not be slowing as much as previously thought, which helped sentiment, though data showing sales of new US homes fell more than expected last month slightly tempered enthusiasm later in the session.