European shares close at fresh peaks on firm oils

European shares ended yesterday at levels last seen more than three years ago as firm oil prices powered heavily weighted energy stocks, while exporters such as carmakers gained as the euro dipped against the dollar.

Shares of British broadcaster ITV surged three per cent on renewed takeover talk, helping boost sentiment in a relatively subdued session as US markets were shut for Independence Day.

The FTSEurofirst 300 index of European blue chips gained 0.3 per cent to 1,153.3 points, its highest close since June 3, 2002. That pushed its gain to 10.7 per cent since the start of the year.

Oil majors were by far the biggest performers, with BP up nearly four per cent before its trading statement today and Royal Dutch/Shell around two per cent higher ahead of the companies' corporate unification.

Crude oil prices holding above $59 a barrel supported the sector with BP, Royal Dutch/Shell, Total and ENI accounting between them for a quarter of the FTSEurofirst's advance.

The euro's retreat to its lowest level against the dollar in more than a year provided support for European equities and in particular exporters such as Germany's Porsche and chipmakers Infineon and STMicrolectronics.

However, strategists warn that risks of disappointment in US earnings might cap any upward equity trend in Europe.

"The market's focus is shifting back to the second-quarter reporting season, which we expect to deliver the first earnings disappointment after two years," said JPMorgan strategist Jan Loeys.

"Earnings growth expectations of around eight to 10 per cent this year in the United States are overly optimistic in our view," Mr Loeys added, citing pressures on profit margins from rising labour costs and the stronger dollar.

Around Europe, London's FTSE 100 added 0.5 per cent and Frankfurt's DAX was 0.1 per cent higher but Paris's CAC 40 trimmed 0.1 per cent. The Swiss Market Index was up 0.1 per cent in Zurich.

Retailers were a weak spot, with Kingfisher off 1.6 per cent after building materials company Travis Perkins said market conditions were challenging.

And Somerfield shares shed two per cent after sources close to the matter said a group including Icelandic investor Baugur had finished sifting through books but that a review of the UK grocer's property portfolio meant any bid would not come before the end of this month.