London: European shares closed sharply higher on Wednesday, with banks, oils and miners rising after economic data in the U.S. proved less downbeat than forecast.
The pan-European FTSEurofirst 300 index of top European shares rose 2.5% to close at 811.41 points, taking its gain for the past two sessions to 4.4%. .
“I wouldn’t call this optimism, I’d call it less pessimism,” said Neil Parker, strategist at Royal Bank of Scotland.
“There was a lot of trepidation about the U.S. numbers. They were better than expected, but they’re still pretty catastrophic.”
The U.S. service sector shrank in January, but less severely than expected. The Institute for Supply Management said its non-manufacturing index came in at 42.9 in January compared with 40.1 in December.
U.S. private sector job losses slowed slightly in January, ADP Employer Services said on Wednesday in a report that came in slightly below economists’ expectations.
Parker cautioned: “You have to be careful about the ADP employment number. That is just an effort to estimate what the (Official Government) payroll number is going to be on Friday.”
Banks added most points to the index. Deutsche Bank rose 3% on hopes that Germany’s biggest bank will be upbeat about 2009 prospects when it reports fourth-quarter results on Thursday.
BNP Paribas, Barclays, Credit Suisse, HSBC, Lloyds and UBS rose between 3.3 and 9.3%.
The DJ Stoxx Bank Index rose 3.5%, but is still down 10% in 2009, having lost 65% in 2008. Banks have been hit by a credit crisis that has resulted in several of them requiring a government bail-out.
ENERGY COMPANIES GAIN
Energy stocks were also among the biggest gainers in the index, with crude oil prices edging up.
Total, ENI, BP, Royal Dutch Shell, and Repsol rose between 2.3 and 3.5%.
Miners surged as gold and copper prices gained. BHP Billiton rose 9.4% after it reported a 2.2% increase in first-half profits, aided by Chinese demand growth.
Anglo American, Antofagasta, Rio Tinto and Xstrata were up between 9.3 and 14.8%.
But drugmakers were on the slide, with Roche falling 9.1% after the group said it sees growth slowing this year and reported a 5% drop in its 2008 profit and missed expectations, hurt by a fall in Tamiflu drug sales and the strong Swiss franc. AstraZeneca, which went ex-dividend, closed 5.2% lower.
Munich Re, the world’s biggest reinsurer, unveiled a disappointing drop in premiums at the start of the year as well as a sharp fall in 2008 earnings due to the financial crisis, sending its shares down 2.9%. But British life insurer Aviva rose 11.2% after it soothed concerns about its capital strength and said its dividend was safe, while reporting a forecast-beating 8.6% rise in 2008 sales.
Further evidence of economic weakness in the euro zone emerged as the number of people claiming unemployment benefit in Ireland rose in January to the highest monthly level since records began in 1967, as a deepening recession spread from construction across the economy.
Across Europe, the FTSE 100 index closed up 1.5%, Germany’s DAX was 2.7% higher and France’s CAC 40 was up 2.9%.
U.S. stocks were higher around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were up between 0.6 and 2%.