European shares end shade higher, Barclays eases

European stocks notched small gains yesterday boosted by a rise in mining companies, but shares in Barclays lost one per cent as rising costs took the shine off the UK bank's growth forecast.

Miners Anglo-American, Rio Tinto and Antofagasta rose as copper prices hit record highs, while gold spiked above $500 an ounce for the first time in 18 years.

The FTSEurofirst 300 index closed 0.2 per cent higher at 1,242.6 points. The index fell 0.7 per cent on Monday, when it failed to hold onto a three-and-a-half-year high.

The pan-European index jumped 4.5 per cent this month, taking the year's gains to 20 per cent.

"Earnings growth is slowing. So what investors seem to be doing is buying the sectors that have relatively the best earnings momentum, such as energy, utilities and materials," said Michael O'Sullivan, a strategist at State Street Global Markets.

He said the markets had largely priced in an expected hike in interest rates by the European Central Bank.

Investors widely expect the ECB to boost its key rate by 25 basis points to 2.25 per cent tomorrow, marking its first rise in five years, but where rates go from there is less clear.

"The ECB probably has not found a consensus yet on rate policy beyond December 1. For this reason, the ECB is unlikely to provide any clear Fed-style guidance on the future course of rates," said Holger Schmieding, an economist at Bank of America.

"Still, the precise wording of the ECB statement tomorrow could provide some vital clues." Investors will also be following the Group of Seven Finance Ministers and central bank governors, who are meeting in London on Friday and Saturday to discuss the global economy and exchange rates.

US stocks rose after better-than-expected consumer confidence and new home sales data boosted investors' hopes for household spending for the holidays.

The Conference Board, a private research group, said its index of consumer sentiment jumped to 98.9 this month from 85.2 in October. Economists' median forecast was for a rise to 90.

Sales of new US homes shot up unexpectedly in October, climbing 13 per cent to a record pace.

Around Europe, both London's FTSE 100 index and Zurich's SMI added 0.2 per cent, Frankfurt's DAX gained 0.4 per cent, Paris's CAC-40 put on 0.3 per cent.

Retailer Ahold gained seven per cent as its third-quarter results more than doubled, boosted by higher margins and cost cuts, and the firm announced a split of its US Foodservice unit.

Standout losers included Belgian drugs and chemicals firm Solvay and Denmark's Lundbeck after the companies said the European launch of their bifeprunox drug to treat psychosis would be delayed.

Solvay lost eight per cent and shares in Lundbeck tumbled 7.4 per cent, underperforming a 0.3 per cent rise in the DJ Stoxx European health care index.

Among other losers, BP and Total eased for a second straight day as US crude oil prices slipped towards $57 a barrel, after Opec ministers committed to keeping crude oil output at a high level.