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Europe ends at three-month highs
LONDON, England -- European shares closed at three-month highs and near break-even for the year amid relief over a large batch of better-than-feared company results and on the back of a rally in the U.S. the previous day. "I think there is still scope to continue higher. Momentum is with it," Gareth Evans, European equities strategist at ING Barings, told Reuters. Insurers were strongest, with Britain's Aviva and Prudential among the leaders after Lehman Brothers named them its top picks in the UK life insurance sector. London's FTSE 100 closed 1.25 percent higher at 3,966.50 while the CAC 40 blue chip index in Paris ended 1.65 percent up at 2,962.67. The Swiss SMI closed 1.33 percent up at 4,586.90. At 1630 GMT Frankfurt's electronically traded Xetra Dax was up 0.57 percent at 2,977.87. An hour earlier the pan-European FTSE Eurotop 300 was up one percent at 831 points and was poised to clock its best close since January 20. The gains were broad-based, with advancing issues outpacing decliners by nearly three to one in moderate volume. Much of the going was set by insurance stocks, with upbeat earnings and guidance from U.S. reinsurer Everest Re Group helping lift European rivals Swiss Re and Munich Re. The stock market's recovery over the past month has also helped to boost the value of the battered sector's equity holdings, thereby easing pressure for insurers to shore up solvency levels. Dutch chip equipment maker ASML leapt six percent to 7.46 euros after unveiling a smaller-than-expected loss, while sport shoes maker Puma of Germany rallied 13 percent to 90.99 euros after the group more than doubled its first-quarter profits and raised its earnings goal for 2003. (Full story) However, German industrial group Siemens shed 1.5 percent to 43.76 euros amid nervousness ahead of its results on Thursday. Shares in French electrical equipment maker Schneider sank 4.3 percent to 41.96 euros after it said a strong euro could bite into its profit margins this year. The Eurotop 300 index, which has risen nearly 22 percent since its March 12 six-year closing low, is only three percent from breakeven for 2003. "We have an end of year target of 910 points on the Eurotop 300, but one has to be cautious about the earnings outlook as expectations are running pretty high, and there will come a point when they will have to be brought down," Evans said. Asset managers were also cautious about future earnings. "I doubt that the current rally is sustainable," fund manager Stuart Fraser from Standard Life Investments in Edinburgh told Reuters. "Not surprisingly, earnings in the United States have come in better than in Europe, as American companies are benefiting from the weakness of their own currency." "But we would need global growth above trend to see the markets break above their current trading range, and I don't think we are going to see the levels of growth we've seen in 2000 for at least another two years," Fraser said. A slide in crude oil prices, triggered by a rise in U.S. crude oil inventories, also helped sentiment by aiding economic recovery. Oil producer cartel OPEC is expected to curb output on Thursday to steady prices. The food and beverage sector fell after the world's largest food group, Nestle, posted a worse-than-expected 7.5 percent drop in first-quarter sales on Wednesday, sending its shares down 0.7 percent to 275.50 Swiss francs. (Full story) The company failed to meet its own long-term core growth target for a fifth consecutive quarter and tacitly admitted the four percent goal was a rod for its own back by saying it would focus on a new measure of organic growth in future. Nestle blamed lower demand for ice cream and chocolate, which dealers said was partly responsible for sending shares in UK chocolate rival Cadbury down 3.66 percent to 336 pence. Unilever, which owns the Ben & Jerry's ice cream brand, fell 1.4 percent to 56.65 euros. On a brighter note, shares in Anglo-Dutch steelmaker Corus jumped 31 percent to 12.50 pence after it named Pechiney's former aluminium head, Philippe Varin, as its new chief executive, sparking hopes of a revival in its fortunes. Media stocks were strong, with French advertising group Havas up 11 percent at 3.40 euros in heavy trading, while sector leader WPP of Britain rose 5.6 percent to 428 pence. Traders said Havas and other advertising stocks had been oversold and were now "playing a recovery in the second half." On the downside, shares in French retailer Casino shed 4.9 percent to 60.30 euros after it posted disappointing first-quarter sales in France. Revenues fell 0.9 percent to 5.289 billion euros ($5.8 billion), though at constant exchange rates they rose 5.6 percent. SAP, Europe's biggest software firm, sank 3.7 percent to 90 euros after Morgan Stanley investment bank cut the stock following a recent run-up.
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