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Europe lifted by strong earnings
LONDON, England (Reuters) -- European stock markets rose sharply on Thursday, as above-consensus results from German giants Siemens and DaimlerChrysler pleased investors and after a surprise drop in U.S. jobless claims. A strong start on Wall Street after U.S. weekly unemployment claims fell to their lowest level since February added further fuel to European blue chips' rise. "Siemens and DaimlerChrysler's results were better than expected and on the macro side, the U.S. labor market data is positive for a cyclical recovery,'' said Stephan Thomas, fund manager at German investment group Frankfurt Trust. But French carmaker Peugeot reminded investors demand was still fragile, however, by cutting full-year forecasts, while STMicroelectronic's shares shed over three percent after warning of shrinking profits. By 1545 GMT, with only Frankfurt's DAX still officially trading, the FTSE Eurotop 300 index was up 1.7 percent at 868 points, while the DJ Euro Stoxx 50 index gained 2.1 percent to 2,480 points. Britain's FTSE 100 index closed 1.5 percent higher at a five-week high while France's CAC 40 ended 2.2 percent stronger and the Swiss SMI rose 1.4 percent. In the U.S., the Dow Jones industrial average gained 0.6 percent while the tech-rich Nasdaq Composite rose 0.9 percent. As investors sifted through a slew of earnings reports they worried that while companies such as Siemens and DaimlerChrysler may be beating consensus estimates few firms are boasting an improvement in sales or profits compared with a year earlier. "Consensus estimates have been met mostly through cost cutting, there is very little evidence of sales growth still or capital expenditure,'' said Paul Casson, an investment manager at SVM Asset Management, which controls about 1.5 billion euros. Solid Siemens, DaimlerChryslerSiemens climbed over four percent after beating market expectations for third-quarter earnings, helped by a strong performance at its medical unit. Core profits at the world's fifth-biggest carmaker DaimlerChrysler sank by nearly two thirds in the second quarter, hit by losses at its U.S. Chrysler arm, but the shares rose 3.8 percent as the drop was not as bad as feared and the auto giant clung to its full-year profit guidance. "It's interesting how at Siemens and at Daimler the picture has been the same. Weak sales and strong earnings,'' said Susan Levermann, fund manager at Germany's largest investment fund DWS. DaimlerChrysler shares jumped as much as 5.5 percent, its biggest one-day gain in nearly a month which added 1.7 billion euros to its market value. "The share price reaction shows how cautious people were about this firm (DaimlerChrysler) ahead of the results. The earnings were good, especially in trucks, which probably reflects good discipline,'' Levermann added. Telecoms were also strong after Telefonica's dividend hike on Wednesday threw the sector's cash generation into sharp relief. "Telecoms are highly prized for their cash generating ability. KPN may be the next to announce a dividend,'' said Paul Casson an investment manager at SVM Asset Management, which controls about 1.5 billion euros. Vodafone, the world's largest mobile phone group by revenue, closed 4.4 percent up. Also in London, shares in insurer Legal & General closed 5.7 percent higher after a surprise dividend hike. Royal Dutch/Shell Group, the world's second-largest oil firm, reported a consensus-beating 51 percent rise in second-quarter profits but said it would not buy back more shares this year. Although the rise in profits came in above market forecasts, Shell shares fell 0.1 percent amid some disappointment on the buyback front. AstraZeneca rose 2.4 percent after raising its guidance for full-year earnings, despite reporting a 13 percent fall in second-quarter earnings in the face of generic competition to three drugs. But shares in Europe's second-biggest carmaker PSA Peugeot Citroen tumbled as much as 6.1 percent after posting a slide in first-half profits on Thursday and cutting key full-year forecasts due to the strong euro and slumping demand, particularly in France.
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