European stocks ended at new 20-month highs yesterday, with oil and auto stocks among top performers as crude oil prices rose and the dollar recovered against the euro.
Dealer talk that BNP Paribas had raised its price target for Alcatel to €15.5 from €14.5 boosted shares in the French telecoms equipment maker 2.6 per cent higher.
But British bank Lloyds TSB closed down 2.8 per cent as it ruled out a share buyback and said it preferred to keep its cash for acquisitions.
The FTSE Eurotop 300 index ended 0.34 per cent higher at 1,026.16 points, its best close since July 9, 2002. Amid fair volume the number of gainers to losers was roughly three to two.
The narrower DJ Euro Stoxx 50 index of euro zone blue chips rose 0.49 per cent to 2,960.02 points.
Stocks were sold-off on Friday after weak US jobs data raised worries about the long-term health of the US economy.
But strategists said valuations still look reasonable in Europe and that the jobless recovery in the United States would prompt the Federal Reserve to keep interest rates at four-decade lows of one per cent.
"Friday's drop was a buying opportunity for the money waiting to pick up any value it sees," said Mark Tinker, chief strategist at Execution Ltd. "But the market isn't in the mood to push things too expensive."
On Wall Street, the Dow Jones industrial average was up 0.27 per cent at 10,624.14 points, while the tech-laden Nasdaq Composite was little changed around 2,047.43 points.
In Europe, London's FTSE closed up 0.15 per cent, Paris's CAC added 0.54 per cent and Zurich's SMI ceded 0.19 per cent.
"European valuations are reasonable and earnings will probably grow by about 10 per cent this year," said HSBC strategist Kevin Gardiner. "The market should drift higher... We like financials and telecoms. Oils still look cheap."
Shares in Royal Dutch/Shell and Total both gained just over one per cent after Lehman Brothers said oils offered an appealing combination of valuation and earnings upgrades.
Goldman Sachs upgraded the European oils sector to "neutral", saying it had been the worst performer in the past year but, as capital expenditure falls, investors should be less concerned about declining return on capital.
In Frankfurt the DAX advanced 0.48 per cent, aided by a 1.8 per cent rise in RWE after UBS upgraded the utility to "neutral" from "reduce".
Demand for RWE stock was also boosted by news of a $269 million cash bonus from Czech subsidiary Transgas and a deal by Heidelberger Druckmaschinen, in which RWE holds 50 per cent, to sell loss-making units to Eastman Kodak.
RWE's gains spurred a 1.9 per cent rise in the stock of domestic rival E.ON, which reports its results on Wednesday.
Auto makers, soothed by a softer euro against the dollar, also moved ahead as investors bet on higher exports to the United States and better profit margins.
Germany's BMW, which also got a lift from a media report it planned to roughly double its sales in Asia over the next four years, rose 1.2 per cent, while France's Peugeot added 2.0 per cent.
Among standout winners, Electricidade de Portugal (EDP) hit a 26-month high amid speculation that it would get more compensation than expected for the annulment of long-term power contracts. It ended up 3.3 per cent.
Elsewhere, Dutch publisher Wolters Kluwer slipped 5.0 per cent as its lack of a detailed outlook overshadowed earnings that were in line with expectations.