By Sitaraman Shankar
LONDON, May 15 (Reuters) - European shares ended higher on
Thursday as commodity and drug stocks gained and economic growth
data proved surprisingly strong, offsetting the impact of
concerns over more rights issues in the banking sector.
The pan-European FTSEurofirst 300 <> index ended 0.38
percent higher at 1,359.86 points, its third day of modest gains
out of the four sessions in the week so far, with the undertone
bullish due to strong economic growth data from the region.
The index has now gained 1.7 percent this month, building on
a 6 percent gain in April, giving investors respite from a sharp
slide that started almost a year ago and stemmed from credit
market problems.
Roche Holding <ROG.VX> rose 2.5 percent and Novartis
<NOVN.VX> gained 1.7 percent on hopes for key cancer drug trials
due to be presented at a research meeting at the end of the
month. Much of the information will be available from Friday.
BT Group <BT.L> jumped 5.4 percent after posting strong
fourth-quarter results, while Deutsche Postbank <DPBGn.DE> rose
3 percent to top German gainers on talk of takeover interest
from insurer Allianz <ALVG.DE>. Allianz and Postbank's owner
Deutsche Post <DPWGn.DE> both declined to comment.
Sharp German economic growth and a surge in France produced
a healthy showing from Europe when growth estimates for the
first three months of the year were published on Thursday.
"It looks as if the European Central Bank will stay on hold.
Interest rates and bond yields may now be low enough for risk
appetite to ... put equities under upward pressure," said
Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.
"The line of least resistance is upward and I wouldn't be
unhappy if, by the end of the year, we had dividend yield plus a
small capital gain from equities," he said.
Vivendi <VIV.PA>, Europe's largest entertainment group,
jumped 5.2 percent after posting a smaller-than-expected drop in
first-quarter operating profit late on Wednesday.
Miners and oil stocks tracked copper and crude prices
higher.
Anglo American <AAL.L>, Rio Tinto <RIO.L> and BHP Billiton
<BLT.L> all gained more than 2 percent while BP <BP.L> tacked on
0.6 percent.
Across Europe, Britain's FTSE 100 <> gained 0.6
percent, while Germany's DAX <> and France's CAC <>
ended flat.
RIGHTS FEARS HIT BARCLAYS, C. AGRICOLE
Banks, the sector battered worst by a credit market crisis
that forced them to take big writedowns and raise capital, were
mixed.
Barclays fell 2.2 percent after the British bank took a new
writedown and refused to rule out a rights issue in the future,
though it held off bolstering equity immediately.
Barclays' asset writedown was smaller than those of some
rivals, but its capital cushion remains thin compared with other
European banks, especially after Royal Bank of Scotland <RBS.L>
and HBOS <HBOS.L> unveiled big rights issues.
"The real crux of the market's interest remains the group's
capital position. Today's statement does little to assuage any
concerns regarding the likelihood of a rights issue, with the
company insisting on keeping the door ajar," said Richard
Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.
Shares in Credit Agricole <CAGR.PA> fell 1.3 percent after
France's biggest retail bank confirmed a 5.9 billion euro ($9.1
billion) rights issue and said it would sell assets and
restructure its Calyon investment banking arm.
Belgian banking and insurance group KBC <KBC.BR> fell 6
percent after posting a fall in earnings and temporarily
suspending its share buyback programme.
But French peer Natixis <CNAT.PA> soared 17 percent after it
avoided making a loss in the first quarter.
(Additional reporting by Peter Starck and Amanda Cooper;
Editing by Quentin Bryar)
