Eurostocks touch six-week high as US data cheers

European blue-chip shares took heart from positive US economic data to gain about one per cent yesterday, led by by financial and chemical firms, but ongoing weakness in healthcare companies tempered index gains.

Britain's Imperial Chemical Industries soared 18 per cent after the maker of Dulux paints beat analyst expectations and announced plans to cut 1,400 jobs.

However, German drug maker Schering slumped 7.5 per cent after posting a fall in second-quarter profits and warning that earnings for the full year would weaken.

Investors hoping that Tuesday's shock drop in US consumer confidence data was an aberration were encouraged by GDP figures for the world's largest economy coming in at 2.4 per cent for the second quarter. Forecasts had been for 1.5 per cent growth.

US jobless and mid-Western manufacturing data were also better-than-expected and further boosted markets on both sides of the Atlantic.

Economists had expected a reading of 54.0 for the Chicago PMI in July but the index jumped to 55.9 from 52.5 in June.

"This is a good number for the economy," said Patrick Fearon, an economist at A.G. Edwards & Sons in Missouri.

"It's consistent with the other manufacturing indicators, showing increasing growth in production and new orders and even a little bit of an improvement in employment, which is declining but at a slower pace."

By 1412 GMT, the DJ European Stoxx 50 index was up 1.1 per cent at 2,511 points while the broader pan-European FTSE Eurotop 300 was 0.7 per cent firmer at 880 points, having earlier hit its highest level since mid-June.

Wall Street was up a similar amount, with the Dow Jones industrial average 0.5 per cent higher at 9,247 points and the Nasdaq Composite Index up 0.6 per cent at 1,732.

While European equities forged ahead, some analysts were still concerned about the ability of companies to grow revenues as they battled with a strong euro and soft demand.

Drugmaker Schering's stock slumped nine per cent after it said it expected 2003 earnings to come in below last year's level due to the appreciation of the euro.

"In terms of earnings, they seem to be in line with guided expectations but what we are more concerned about are sales, and revenues are not great across the board," said Clive McDonnell, European strategist Standard & Poor's equity research.

German retailer Metro was one stock to encourage on the revenue side, notching up its sales guidance for 2003 after a strong second quarter and encouraging a nine-per cent rally in its share price.

And Swiss engineering firm ABB continued to power ahead, driven by a steady stream of upbeat analyst assessments. The stock was up 11.5 per cent, taking gains to the week to more than 30 per cent.

Fellow engineer Alstom was up 8.7 per cent in sympathy. Results were mixed from financial services firms. BNP Paribas, the euro zone's largest bank by market value, rallied four per cent after it beat forecasts on a surge in profits at its investment bank and said it would buy back stock.

Deutsche Bank revealed its first quarterly profit after nine months in the red, helped by strong trading income and cost cuts, but missed most analysts' forecasts, sending its shares lower.

A lack of top-line growth at BT worried some analysts and sent the stock down four per cent despite a rise in first-quarter profits at Britain's former state-owned telecoms operator.