German poll call propels European shares higher

European shares closed higher for a fifth consecutive session yesterday, with German stocks benefiting as investors bet an early election there will bring a more pro-business government.

Utilities E.ON and RWE put on 3.87 per cent and 3.1 per cent on hopes a new German administration might delay closure of their nuclear power plants.

German Chancellor Gerhard Schroeder on Sunday called for an early national vote within months after a crushing regional election defeat for his Social Democrats.

The FTSEurofirst pan-European 300 index officially closed 0.44 per cent stronger at a new five-week high of 1,097.47 points.

A statement by European Central Bank President Jean-Claude Trichet that interest rate cuts would compound the euro zone's problems with low growth and that he saw no significant inflationary pressures failed to knock the market from its good run.

The FTSEurofirst index has climbed by around two per cent in five sessions as it sneaks towards its 33-month high in early March of 1,109.5 points.

The narrower DJ Euro Stoxx 50 index rose 0.67 per cent to 3,071 points as European shares gained support from the Dow in New York standing 0.38 per cent higher at 1630 GMT.

Mr Schroeder's shock call boosted stocks generally in Frankfurt. The DAX, Europe's best performer, added just over one per cent.

Some analysts say shares and the German economy will react positively whatever the result of a poll, because Mr Schroeder would have to promise to speed up reforms to be re-elected.

"Though Schroeder is clearly taking a gamble, his decision at least means there will not now be 16 months of potential political paralysis in Germany," a UBS strategy note said.

"Instead, economic reforms could be taken forward as early as the autumn if Schroeder wins a fresh mandate for reform or the Conservative opposition take over."