European shares notched up a third straight week of gains yesterday as data showing improvement in the US labour market overshadowed weakness in tech stocks following a grim outlook from US bellwether Intel Corp..
Anglo-Swedish drugs group AstraZeneca lent support as it rallied 2.5 per cent on hopes its new anticoagulant drug will win backing from a US regulatory panel next week, while spirits group Allied Domecq rose two per cent after promising strong growth in annual earnings.
The FTSE Eurotop 300 index of pan-European blue chips closed 0.8 per cent firmer at 989.2 points, up almost five per cent from the 2004 low it hit in mid-August.
Despite the recent rally, stocks have struggled to make progress this year.
"The European equity market is stuck in its tightest trading range for 20 years," Citigroup strategists said in a note.
"Positive bottom-up factors (valuations, earnings growth) are cancelling out top-down concerns (higher rates, slowing economies). We believe that the bottom-up will win out in the end, but it will be a gradual process."
The narrower DJ Euro Stoxx 50 index rose one per cent to 2,739.4 points.
Stocks rose after data showed US employers added 144,000 workers to non-farm payrolls in August, slightly less than the 150,000 expected by economists but a substantial increase on the meagre 32,000 from July. The unemployment rate dropped to 5.4 per cent.
"It suggests the slowdown is not continuing, at least as far as the labour market is concerned," said Paul Mortimer-Lee, chief markets economist at BNP Paribas.
Worries about a recent economic soft patch extending had caused some analysts to question whether the US Federal Reserve might hold fire on planned interest rate rises.
"We think the data has increased the probability of the Federal Reserve raising interest rates. Employment growth is moving up enough for the Fed to feel confident about its interest rate hikes," said Kevin Grice, senior economist at American Express Bank in London.
The dollar rose after the data while bond prices fell.
In New York, the blue-chip Dow Jones industrial average was steady at 10,286.9 points by 1616 GMT. The Nasdaq Composite Index fell 1.5 per cent to 1,845.3 points, led by a 7.5 per cent decline in Intel.