Euro fall helps dollar-earning eurostocks rise

European shares reached fresh 16-month highs yesterday as a rebound in the battered dollar boosted exporters including cosmetics giant L'Oreal and automaker DaimlerChrysler.

In the United States, solid results from companies such as General Electric and Juniper Networks helped Wall Street rise in early trading, while data showed confidence among US consumers had surged in the new year.

By 1458 GMT, the FTSE Eurotop 300 index of pan-European blue chips was 0.9 per cent higher at 988.7 points, while the narrower DJ Euro Stoxx 50 index rose 0.7 per cent to 2,861.9 points.

"Today is all about the dollar," said Daniel Birch, a strategist at independent broker Execution.

A slew of comments this week from euro zone officials expressing concern about the euro's rise has helped knock five cents off the single currency since it hit an all-time high against the dollar near $1.29 on Monday.

A weak dollar hurts profits in Europe, making exporters less competitive and reducing earnings that are made in dollars and reported in euros.

"The dollar was like a snowball rolling down a mountain in December, completely a momentum trade, and as we were saying, it didn't reflect the fundamentals," Birch said.

"Even now the current valuation doesn't reflect the fundamentals, so we would anticipate a further fall down towards the $1.10 level.

"All our technical indicators bar one have signalled a turn in momentum and a turn in the trend."

The University of Michigan's consumer sentiment index helped fired stocks higher as it hit its highest level since 2000.

The preliminary January reading jumped to to 103.2, from a final December reading of 92.6 in December, easily beating expectations for a rise to 94.0.

"It's a surprise in terms of the magnitude but certainly not in terms of the direction," said Ken Wattret, chief euroland economist at BNP Paribas.

"It tells us that the underlying situation for the US consumer is better than the bond market has been making out... it's a warning shot for the bond market."

In New York, the blue-chip Dow Jones industrial average was 0.2 per cent higher at 10,570.2 points, while the Nasdaq Composite Index rose 0.8 per cent to 2,125.4 points.

In Europe, DaimlerChrysler led auto sector gains as it powered 4.7 per cent higher on the back of the euro retreat.

L'Oreal, which has a large exposure to dollar-denominated earnings, was also boosted by renewed speculation of a merger between France's two biggest drugmakers, Aventis and Sanofi-Synthelabo.

L'Oreal, which owns just under 20 per cent of Sanofi, rose 5.2 per cent, while Sanofi gained 4.6 per cent and Aventis climbed 3.7 per cent, although analysts said merger talk may be premature.

French telecoms equipment maker Alcatel was another standout following Juniper's better-than-forecast result late on Thursday, adding 3.8 per cent and taking gains for the year to date to around one-third.

Oil stocks under-performed, however, with BP down 1.4 per cent, France's Total 0.9 per cent weaker and Shell off 0.8 per cent as analysts continued to take a dim view of earnings prospects in the sector.

Adecco, the world's largest employment agency, slumped 9.3 per cent after the company failed to shed any light on the scale of the accounting problems it revealed on Monday.