Oil, steel stocks lead European stocks to three-year high

European shares hit a fresh three-year high yesterday, with oil majors pounding ahead as crude prices surged and steel makers benefitting from a broker upgrade.

Shares extended early gains as futures and options expired around Europe and short positions were closed.

The euro remained at multi-month lows against the dollar, with investors eyeing news on the political crisis in the euro zone as EU leaders meet to hammer out a long-term budget deal at the second day of their summit.

The euro's slide supported exporters.

Steel makers gained after ABN AMRO upgraded Corus and Arcelor to "add" from "reduce", dealers said. Arcelor rose 2.1 per cent and Corus added 0.6 per cent.

Higher crude prices, breaking above $57 a barrel, lifted oil majors, making them the top gaining sector in Europe. French Total rose 1.7 per cent, Anglo-Dutch Royal Dutch gained 2.1 per cent.

By 1125 GMT, the FTSEurofirst 300 Index rose 0.4 per cent to 1,142 points after a peak at 1,145.28. The narrower DJ Euro STOXX 50 firmed 0.7 per cent to 3,180.79.

Sanofi-Aventis added 1.7 per cent, reversing a loss of over five per cent in the previous session after a US court invalidated Sanofi-Aventis's Lovenox patent, clearing the way for generic firms to try and market rival versions of the drug.

JP Morgan cut its Sanofi-Aventis recommendation to "neutral" from "overweight", citing a lack of visibility on the drugmaker's growth drivers, blood thinners Lovenox and Plavix. But elsewhere in the sector, Merck KGaA gained 1.6 per cent, continuing to rise after the firm late on Wednesday lifted its mid-term profitability goals and said its Erbitux drug could prolong life in cancer patients.

Broker Equinet raised its target price for Merck shares to €71 from 65, retaining its "accumulate" rating.