Autos, insurers help eurostocks end week higher

Insurers and carmakers drove European shares higher yesterday, helping bourses end up on the week as investors look for good news from the second-quarter earnings season that kicks off properly next week.

"The earnings season is about to get into top gear and will be an important test of whether markets are building a base for a third-quarter upswing," said Anais Faraj, a strategist at Nomura bank.

Among the standouts, ABB rose four per cent to 4.67 Swiss francs as the market breathed a sigh of relief after a US judge approved a $1.3 billion asbestos settlement, paving the way for an asset sale to lighten ABB's heavy debt load.

Technology was the only industry group under water, due to its leader, Finnish handset maker Nokia, dropping 1.2 per cent to €15.70 as a recent rally cooled before it reports earnings next Thursday.

Nokia ended the week up 11 per cent. Other top technology firms will also update investors next week, such as Ericsson, Philips and software maker SAP.

By 1548 GMT, the FTSE Eurotop 300 index of leading European blue chips was up 1.27 per cent at 865 points, ending the week 1.6 per cent ahead. Advancing issues outpaced decliners by about four to one.

The index is still flat for the year, having rebounded by about 26 per cent from a six-year low in mid-March as it priced in economic recovery and shed fears arising from the Iraq war.

Fund managers said a good crop of quarterly results and harder evidence of economic recovery would be needed to justify recent gains in shares and lift them above their trading range.

"The overall situation is still pretty fragile," said Michael MacPhee of Baillie Gifford asset management firm.

The negative impact of the stronger euro on European exporters and the benefit of lower interest rates will be closely watched in company scorecards.

"Earnings will have a bit of a headwind from foreign exchange, but there has been material improvement in financial conditions," MacPhee said.

So far this year, earnings have been propped up by cost cutting rather than rosier demand.

"All this does is buy time for companies that are having difficulties. What everybody needs is recovery in demand and topline growth," MacPhee said.

Investors will hang on every word from Alan Greenspan next Tuesday and Wednesday when the chairman of the Federal Reserve gives an update on the US economy, whose recovery provides a key underpinning for bourses as Europe's own economy shivers.

The DJ Euro Stoxx 50 index rose 1.4 per cent to 2,477 points.

The European insurance sector, a barometer of market sentiment due to its sensitivity to the price of shares that make up a big chunk of the industry's assets, gained 2.6 per cent.

Swiss Reinsurance rose 4.3 per cent to 82.20 Swiss francs, while German rival Munich Re gained 4.5 per cent to €93. Dutch ING Groep advanced four per cent to €15.87.

The sector is up by half from its multi-year lows of mid-March, easily outperforming the broader market, and some commentators see further upside.

"European insurers are looking cheap," said Nomura's Faraj. "Moreover, from a broader angle, merger and acquisitions speculation may energise the sector if well-heeled US insurers start to look across the water."

The auto sector rose 2.3 per cent after the automakers association ACEA said consumers in Western Europe started buying more cars last month, with France's Renault one of June's biggest gainers.

Registrations in June rose 2.9 per cent from a year ago, the best rise so far this year, while Renault's sales jumped nearly 13 per cent. Shares in Renault rose 2.7 per cent to €48.29, while German luxury carmaker BMW, another winner, rose two per cent to €34.54.

Earlier this week, the auto sector hit its best level so far this year as investors bet on economic recovery to lift sales.

Meanwhile, Spain's Acciona rose 6.7 per cent to €44.13 after announcing it had bought 8.7 per cent of rival building firm FCC, sending FCC shares up 5.5 per cent to €25.95 as investors smelled more consolidation in the sector. On Wall Street, the Dow Jones industrial average was up one per cent at 9,133 points, while the Nasdaq Composite rose 1.2 per cent to 1,737 points.