London: European shares rose to a two-week closing high on Thursday as oil companies bounced, helped by a surge in the crude price, and growth in the euro zone services sector boosted investor sentiment.
The pan-European FTSEurofirst 300 index of top shares rose 1.4% to 1,017.50 points, the highest close since 18 May. The index is still down more than 8% from a mid-April peak on worries a debt crisis in the euro zone could derail economic recovery.
“It’s a relief rally, a snapback, after these horrifying days and weeks, with the Greek and European tragedy,” said Franz Wenzel, strategist at AXA Investment Managers in Paris.
“But we don’t see any improvement, economically or valuation-wise. We expect shares to trade in a range. For European equities to go back on the upward trend, we would need to see political coherence, which is currently not in sight.”
Energy companies were among the biggest gainers, bouncing from recent weakness, with the oil price rising immediately after a government oil inventory report showed crude oil stocks fell more than expected last week.
Later prices fell back, hurt by a stronger dollar, to about $73. BG, Royal Dutch Shell, Total and ENI rose between 1.6% and 3.1%.
BP closed 0.6% higher, having been up by more than 4% in morning trade.
It is down more than a third from its mid-April peak as it struggles to contain an oil spill in the Gulf of Mexico. More than £40 billion has been wiped off its value.
Banks were among the gainers in a broad market rally. Barclays, Credit Agricole and Lloyds rose between 2.1% and 2.5%.
Wall Street was slightly higher around the time European bourses were closing. The Dow Jones was flat; the S&P 500 and Nasdaq Composite were up 0.2% and 0.5% respectively.
A raft of US data was mostly positive but factory orders disappointed. New orders received by US factories rose 1.2% in April, US Commerce Department data showed, marking a slowdown from March’s surprisingly robust gain.
US private sector employers added jobs in May and the economy’s dominant services sector increased payrolls for the first time in more than two years. The data comes ahead of the all-important monthly non-farm payroll figures on Friday.
Air France rises
Among individual companies, Air France ranked among Europe’s top gainers, up 6.1% after reporting a “marked” recovery in traffic.
In European indicators, the Markit Eurozone Services Purchasing Managers’ Index (PMI) grew in May at its fastest pace since August 2007, bringing to an end an almost two-year stretch of job losses among services companies.