LONDON (Reuters)
European stocks advanced yesterday and set new six-year closing highs, led by gains in BP and Total , which tracked a near 1 per cent rise in US crude oil prices.
Telecoms equipment maker Ericsson rose 2.5 per cent on upbeat broker notes and pared Friday’s 6 per cent fall when its quarterly earnings fell short of market expectations.
The FTSE 100 closed up 7 points, or 0.11 per cent, at 6,317.9, recovering from a sharp drop earlier in the session after police said a letter bomb had exploded at a London office and one employee was injured.
The pan-European FTSEurofirst 300 index rose 0.04 per cent to 1,538.3, a six-year closing high, but ended below a six-year high of 1,540.0 hit in the session. Trading volumes were sluggish on a day of thin company results.
The index extended a two-day winning run and is now up nearly 4 per cent so far this year on mostly strong results.
Some strategists however were cautious. Merrill Lynch said it was telling its private clients to cut back on non-US equities as signs of a slowing down of the global economy appear.
“We prefer in equities, to be positioned in international equities but some of this... should start to be pared back,” Merrill Lynch’s chief European quantitative strategist, Khuram Chaudhry, told a briefing on the bank’s 2007 view.
The investment bank is expecting growth stocks to outperform value stocks, and large caps to outperform small caps.
European stock markets initially extended losses in late morning trade on reports of a letter bomb explosion in London but then the market stabilised.
US stock indexes were little changed towards the close of European trading hours.
BP advanced 1.2 per cent, Total gained 0.7 per cent and Royal Dutch Shell added 0.3 per cent. BP unveils results on Tuesday on a busy day for corporate earnings.
Barclays Global Investors said it expected commodity prices such as oil and metals to ease this year.
“Commodities are likely to come under pressure and see returns erode in 2007, partly due to the extreme amounts of speculation, causing commodity prices to lose touch with weakening fundamentals,” Barclays Global Investors said in a note.
“With oil supply outside of Opec slated to grow at its fastest rate in 30 years, demand seems poised to slow. In addition, our lead base metals research seems to point to a 30 per cent fall in the price of copper by the end of the year.”
Around Europe, Paris’s CAC-40 rose nearly 0.1 per cent but Frankfurt’s DAX fell 0.2 per cent.
Europe’s biggest budget airline, Ryanair, was a standout gainer, up 7 per cent as the firm confounded analysts’ expectations with a profit rise for its difficult third quarter, thanks to higher ticket prices and raised its full-year target.
Among losers, Endesa fell 2.4 per cent after German utility E.ON’s raised bid of 38.75 euros per share for the Spanish utility came short of expectations of some Endesa shareholders.

Last update on: 6-2-2007