European shares end up 1%, snap six-day slide

Commodity-related stocks helped lift pan-European indexes one per cent yesterday, ending a six-session losing streak on hopes that high prices for crude and other raw materials will keep boosting profits for miners and oil firms.

Sanofi-Aventis was another positive influence, gaining three per cent after saying its chemotherapy drug Taxotere outperformed a rival drug in a late stage clinical trial, and on hopes Europe's third-largest drugmaker will raise its merger synergy goals.

By 1533 GMT, the FTSEurofirst 300 index of pan-European blue chips was unofficially closed one per cent higher at 1,194 points, within half a dozen points of last week's 39-month high.

The narrower DJ Euro Stoxx 50 index rose 1.3 per cent to 3,326.5 points.

As expected, high commodity prices have fuelled bumper profits for miners, metal makers and oil companies but earnings in other sectors have also impressed during the second-quarter reporting season.

"Overall, the latest results season reaffirms the robust profits outlook for European companies and this remains a key support for our ongoing bull case for European equities," strategists at Smith Barney said in a note.

"We see modest earnings growth, modest valuations, improving liquidity and our powerful de-equitisation theme driving decent double-digit returns over the coming 12-months."

The resurgence in merger and acquisition activity has been another powerful driver of recent stock market gains, strategists said.

"People are looking for growth opportunities because the market is improving and they want to see more than dividend yield," said Lex Werkheim, an asset manager at Eureffect in Amsterdam.

"There is money out there which wants to invest in growth. Clearly a lot of people are seeing a healthy environment ahead."

In New York, the blue-chip Dow Jones industrial average was 0.6 per cent firmer at 10,613.4 points, while the Nasdaq Composite Index rose 0.2 per cent to 2,141 points.

Around Europe, London's FTSE 100 closed 0.8 per cent higher, while Paris's CAC-40 ended up 1.3 per cent. In Zurich, the SMI rose 0.6 per cent and Frankfurt's DAX closed 1.6 per cent firmer.

US crude oil rose more than two per cent to above $64.50 a barrel after a halt in Ecuador's oil exports helped the market rebound from its mid-week rout which knocked almost $4 a barrel off the contract.

Heavyweight oil stocks like BP and ENI, which have been held in the sway of crude prices, rose between 1.5 and 2.3 per cent.

Shares in BHP Billiton rose 1.6 per cent after Merrill Lynch raised its earnings forecasts for the miner based on higher oil prices. Merrill Lynch said it was upgrading its 2006-2008 estimates by four per cent.